The Digg redesign had any number of problems, most of them inherent in any project to completely reimplement a complex piece of software that already has a large user base. Bugs, missing features, etc.
IMO, the larger problem was one of philosophy. Was the site primarily designed for people generating the traffic or those receiving it? How do you deal with people gaming the system? Digg chose to side with the people gaming the system, presumably because it was a more obvious path to profitability. (Digg had a large staff and ridiculously high burn rate) Prior to the v4 redesign, however, there was at least the illusion that regular users' submissions and voting mattered. Digg v4 simply eliminated the roundabout of gaming the system by making votes almost irrelevant; publishers and marketeers could simply pipe all of their content directly to the top of the frontpage by gathering a sufficiently large number of followers. It made the site little more than a pseudo-RSS frontend for content farms.
Reddit has been successful by fighting a vigorous, if behind-the-scenes, war against spamming and gaming. It may be regressing toward the mean, but at least it's a mean defined by the users rather than a spammer.