I think that saying that it has "unravelled" is too simplistic. Wikipedia hasn't decreased in size or popularity - indeed, it continues to increase. What we have, however, is an imperfect community, with imperfect rules and regulations and of course it has humans involved with it and running it, and as we all know humans are imperfect. But perhaps the biggest problem with Wikipedia is a lack of transparency, and this, I think, is our major aim in having this forum. There are holes, and it would be foolish to expect there not to be holes. But it is not transparent with them. For all of the glory of a wiki, which is supposed to make it transparent, Wikipedia, especially on major issues, is far from transparent. Just a quick look at the Arbitration Committee, whose role is to handle disputes and to set down hard punishments, shows the root of the problem. The Arbitration Committee, for all of their seriousness and importance, has no real rules to abide by. While there is a charter for administrators to abide by, its not really mentioned a lot, and adminship is considered to be "no big deal". Yet for regular users, who would ordinarily have the most freedom, they in fact get the least. New users are presumed to be reincarnations of old users, are treated as if they are malicious vandals when in reality they are just new and don't know what they are doing, and so forth.
And beyond all of this, there are secret alliances. Jimbo Wales, who founded Wikipedia, has gone to lengths to push his agenda. Whether it is just because he likes certain things to look in a certain way, or whether it is something more sinister (think of the idea of controlling the world through its media, a la Rupert Murdoch et al), we don't rightly know. But there are some priveleged editors, who are unbannable, who get preferential treatment, and who can do whatever they like - that much we do know. Some people call these priveleged few "the cabal".
Wikipedia, as an effort, has many fatal flaws which can never be remedied. It has several others that cannot be remedied due to the way that it runs, due to the fact that Jimbo is leader by himself, due to the fact that there are a priveleged few, and due to the lack of transparency - 3 things that can be changed.
There are probably 2 key events that changed Wikipedia forever:
1) Firing Larry Sanger, who created Wikipedia (and subsequently Wikipedia pretended that he had nothing to do with it)
2) Closing down Nupedia, which Wikipedia was a less serious spin off of.
If today Larry Sanger was still involved and Nupedia was still in operation, what we see now as Wikipedia would be much stronger and in much better shape. Wikipedia then could continue to be care free while the more serious Nupedia could be feeding off its popularity. And Larry Sanger could have been credited correctly, and the lies about him and so many other aspects of Wikipedia could have stopped.
Those are probably the 2 key turning points in Wikipedia's history.
Edit: I changed "we" to "Wikipedia" in 1) above, I think thats what u meant -- Lir