I think its getting pretty close to time for a revert back to Digg v3. Look at google trends for Reddit vs. Digg. When something's a failure, its a failure.
But at a pretty hefty cost. Definitely wasn't ready for prime-time, but it's here and they're going to be pretty busy over the next month or so re-integrating v3 philosophy and stabilizing the new back end.
Release - Ship it, get it out there for public consumption
Iterate (on your release) - Refine what you just shipped however you see fit (bugs, missing features)
Repeat - Ship what you've refined and begin iterating on what you've released
Ultimately, they released a product that wasn't ready for public consumption despite being in Beta for several weeks. Had their algorithms worked effectively, preferences to change the default behavior existed, and a stable back-end in place we might be singing a different tune.
Number one, digg's story quality tanked during version 2 and the comments went along with it. Version 3 brought an even more broken commenting system, and more of the same run of the mill storieds. Version 3 also brought in some ridiculous lag, that for whatever reason, managed to post articles from Engadget, reddit, etc days later. Digg was the place to get tech news. With version 3, it was the place to get reddit's news from 3 days ago.
Now with Version 4 there are auto submitted "publisher" stories. This is what's causing people to jump ship? Frankly, if that's the reason they're leaving digg, I hope they stay away from the social news sites I'm on.