I see more of your perspective now. Generally, this would work given the servers population was growing rapidly, but it seems not to be.
From what I've gathered, you're saying if everything is working properly, new strong communities will be built at the expense of communities which have lost their prime / are no longer run properly. This way, the nations wont be endlessly divided into minimum activity nations over time.
The problem with this is that in the context of a stagnating server, for each new nation, a nation must also perish 100% of the time, which it is not / won't ever be.
If a nation does not perish, it's playerbase will still be there, If there's 8 nations among 200 people, that's 25 players per nation. If it turns into 10 nations, that's 20 players per nation, the amount of nations is intrinsically tied to the amount of active players within any given nation. If it is easier to make a new nation than it is to destroy an old one, over time you will see more and more nations among the same 200 players, such that any given nation feels like a ghost town and is arguably active enough to be considered a nation.
Take for example, nation A has 100 active players, but is far out of its prime. One player takes 40 players and makes nation B. With no entire takeover of nation A or nation B, this will always lead to a recursive divide of the playerbase. Now, instead of Nation A having 14 people online during peak, they have roughly 8. Nation B will have roughly 6.
In order for this to be viable for the server, 100% of the time nation A or B will need to be destroyed to allow for their playerbase to be reabsorbed by the server, contributing to nation B's populace or various other strong communities within the server rather than having two semi-active nations.
The interval in which a nation's population is divided is heavily tied to how easy it is for someone to make a new nation. If it is easy (i.e. you can do it in freebuild without considerable barrier to entry) to make a new nation, the interval will decrease, as eventually you will have someone who doesn't like how things are going / wants power, and they will take people to form a new nation.
Despite the lack of freebuild, there already is a comical amount of new nations being established even now, that each feed into a very niche style of rp that can often times be found or !merged! within parts of other nations. It feels like each time you go to cloud temple there's a new sign for a new starting up nation.
The ONLY way for the proposed viewpoint to be healthy for the server is if it is growing and can afford to continuously divide the playerbase to scale with playercount, right now it is severely in the red and the nations to player ratio is in need of a massive purge which I don't think will ever happen.