But your second point on the owners letting reddit run itself is spot on. They just made sure the site worked (most of the time ;D) and basically let people govern themselves. But what really ties it in, is subreddits. If a mod on a subreddit ruins something or acts like a jerk, the people are free to setup a new subreddit, circumventing the overlord of the previous sub.
Then there's the simple UI.
And most of all, the people. The people posted interesting stories to the main subreddits. It's kind of disappointing to see the noise level increasing against the signal lately but that's where subreddits come in.
I almost see HN as the new reddit, but with a new feature, filtering out downvotes of new people. I come to HN and a few specific subreddits for intelligent conversation, then the main reddit page for OMG CATS.
Oh yes, I got flamed by Arrington for predicting it, but diggv4 had to have been some VCs getting hungry for a return they'd expected before the fickle market turned.
http://techcrunch.com/2010/05/29/guy-who-copied-digg-slams-d...
Conversely, Steve and I always talked about 'letting users do the hard stuff.' The more power and ownership we could give them (with guidelines) the more they impressed us. See things like /r/IAMA and /r/Skyrim for a couple examples of genius in idea & execution we alone never could've come up with.
As for traffic, reddit's traffic the Monday before diggv4 was about 600k uniques and 900k the Monday after.
It pretty much skyrocketed from there. Last month reddit had 34M uniques and 2.3B pvs. All after Steve & I left, too. Correlation or causation, I leave up to you.