If you look at other areas of the net, you'll see exactly why the player base has dwindled so much.
Most people here have a MySpace account I would assume. A huge part of that number probably just stops by now once in a blue to check it. So what happened? They put ads all over the place, cluttered the interface, tried to be a Facebook clone with all the apps, and generally became unusable. And they did this over a very short period of time.
Planeshift is very much the same. I'll admit, people wanted new features, myself included. They begged and pleaded for them. As a response, Planeshift tried to take a HUGE leap over a very short period of time. This caused many people to be unable to operate the game, whether it was from low specs on their comps to the game just not loading at all. I think this rush to grow up overnight was a result of mounting tensions within the community, and a rush to satisfy the masses.
As Rigwyn said, the playground needs to be fixed first. Problem one has always been that to even get the game going requires more hacking than any casual gamer should have to go through. Goal one should be to have something that works out of the box, without tweaking settings files and going through system folders. Problem two is that once players are in the game, it lags more than games with tons more concurrent users, much larger environments, and much higher variety of in game items/clothes/player models. And the current third problem as stated before is that many can't even launch the game in the first place.
Though PlaneShift is a role-playing game, right now its future, both of getting older players to return as well as new players to stay, rests solely on the probably overworked shoulders of the coders. Perhaps its the 3D engine. Perhaps its the code for the game settings. Whatever it is, something on the technical end needs to be optimized to allow players to spend less time trying to get it to work and more time focusing on roleplay. This may mean rolling a whole new client altogether and starting from the ground up. But buildings can't stand on weak foundation, so perhaps this is the best time to start rebuilding, taking what has been learned and making it even better. Starting over is not a step back unless you don't learn from mistakes.
Once everything gets rolling, people will play and hopefully heal and rebuild the fractured community. I've certainly had fun times playing when I could get on, and wouldn't mind popping in once in a while to have a little fun (or mischief) again.
And Illysia...I understand it isn't very fun to have such an establishment without customers, but these days, there just aren't enough to go around. Don't give up on it, but don't be afraid to go out on some adventures elsewhere either. If they rebuild it, they will come.