if SO manages to loose this community then signal to noise ratio will further increase, the site will go down the drain and new competitors will appear.

Are people really that motivated by points and badges? I think these are similar to toy money/monopoly money. if a person does not like the process of investigating a problem then this will not be a sufficient motive for participation; if its not fun then nothing will help here. Career incentive? I doubt that, for a real job they will look at other things.

Still SO has a dilemma, like wikipedia it is a huge amount of text and it needs some meta moderation, and then some meta meta moderation too; so monopoly money is probably supposed to move a person up along this hierarchy. The problem is that a hierarchy of moderators will eventually piss off at least some competent contributors, if not all of them; this problem is common to most sites: slashdot, wikipedia, SO, HN - over time they all run into this problem.

Its like in real politics; nation states need bureaucrats, but these can also turn into a mortal danger to the state