Then they had to start pretending that things had more upvotes than they really did, which made it worse.
The place ghetto-ised in a scarily quick fashion.
I'm not sure though how much the earlier 'Digg-revolts' over senselessly mucking around with the UI contributed. Had they already destroyed or eroded a lot of the goodwill of their users?
Personally I believe the problem started back when they decided to boot Apple stories off the front page, and twiddled their algorithm to achieve it. Yes, Windows fanboys hated seeing those stories popping up all the time, and would go in and troll the Apple fans something chronic (and then complain that it was justified because the Apple users were doing the same thing - even though they weren't)... but doctoring the results like that just meant that what was (at that time) basically one of the few IT companies doing new and interesting things, instead of just being a "me too" copycat.