They're a useful case-study for talking about ideas around direct democracy. See http://www.adelaide.edu.au/apsa/docs_papers/Others/Gauja.pdf
The causes of the party's decline is controversial. My take - that they ran into scaling problems when their parlimentary party grew large. Parts of their parliamentary party felt hamstrung by a membership who were free to take positions on issues that weren't well-considered or practical. They needed to move quickly on issues, and the direct democracy process stalled them. The federal parliamentary party went rogue, and a large section of the membership felt betrayed. This killed the collaborative culture that was the heart of what they stood for, and the party collapsed in infighting.
I'm pretty frustrated with the way freedoms are being eroded in the west, but direct democracy is not a strong response to this. It's complicated, ripe for gaming and diffuses responsibility - bad qualities. When it fails, people will look to a "strong leader" who "gets things done" to replace it. Danger.
Keep thinking though, because there will be better models out there. I suspect that if you could draft a new constitution, you could produce a free society with strong real democratic qualities using a structure similar to the old Icelandic Commonwealth - basically lots of statelets.
The major weakness of this kind of system is that it's hard to fight big wars, even to defend yourself. That's a reason that the awesome original Articles of Confederation were replaced with the current US system.