As the community increases in size, it's normal for this 'decline' to appear. I believe rather than focus on tweaking karma points or moderation is to introduce list functionality ala twitter so people can create their own HN within HN, as they see fit. As newer HNers start contributing, they can be tracked and eventually added to lists so it doesn't stagnate. Doing this will ensure old-timers will be happy while the community gets bigger and the quality 'declines' relative to x years ago.
That sounds exactly like Reddits, which in my opinion are necessary to make Reddit tolerable, so I don't think it would be a bad idea here. Maybe having a finite number could work, too, as opposed to allowing any user to create sections.
