I agree that Hubski has more intelligent discussions, but I'm not convinced it's a result of the Hubski system itself. I think it's just a more thoughtful community. Reddit had thoughtful discussions before it became mainstream. Same as Facebook and others. Hubski still encourages group think by pushing voted comments and posts to the top. The advantage it does have is a lack of a downvote mechanism. On Reddit, a single person can hide a post or comment by downvoting early. So there's greater incentive to appeal to as wide an audience as possible.
I think you've hit on a key issue that community size plays a large factor in the quality of discussion. Many of the niche subreddits I visit still have thoughtful dialog. I think any community will suffer an Eternal September effect as they grow more popular. One of the ways reddit avoided this was by allowing new communities to form to mitigate this (see /r/gaming -> /r/games -> /r/VideoGameAnalysis) but I'm not sure if there's any way to completely avoid this fate. Another way some communities have handled this is through strict moderation/curation (e.g. metafilter's cost for signing up, strict moderation of /r/askscience ) I think Hubski's method of following users and being self moderating is an interesting idea, especially combined with the focus on slower, long form material rather than "fast food" content. Though I'm sure there will be some people who will complain that the recent influx of users from reddit (of which I am one) has degraded the quality of content. But hopefully that will not be the case.
Wow, I never knew about the Eternal September phenomenon but now I understand why online communities take a turn for the worst after becoming popular. The same thing happened to YouTube after 2009.
And as for hubski, only time will tell, however I'm not so sure any kind of moderation could solve the problem, only delay it. Let's say hubsky gets flooded with people posting shit content and comments. The people you follow will have a harder time finding good discussions, thus you'll have a tougher time. This creates a pressure to conform to the tone of the newcomers and before we know it, we're back to where reddit is now. At least that's my hypothesis.
I think the big problem is in wanting the entire community to be the same way. We can chastise reddit or digg or 4chan or whoever for having group think, but it's the groupthink here to want "intelligent conversation". The problem is that anyone who doesn't adhere to this culture, or any internal culture, is then shunned by that culture. It's a side effect of scale that eventually the values and culture of the community becomes fragmented. No matter how good a site is at giving you the ability to filter based on your preference the simple knowledge that 'your community' has dissent in it, even if you don't see it, is enough enough to get most people complaining about the state of the community. It's more a humanity issue than a service issue.
I hope the atmosphere here doesn't change that much. Already a lot more conversing than I've ever seen in reddit. And this is just one thread! On a thread such as this on reddit, everyone would be screaming, tl;dr
I think the system prevents opinions from being buried through downvotes, which helps preserve a wider variety of opinion.