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.