These are my thoughts:
When I first joined the situation was pretty much option number 1 as far as official enforcement of rules. Generally speaking though it was understood that you shouldn't talk about ongoing games, and if you did half-a-dozen members woud tell you to shut up. There were a lot of threads with cheating accusations, and opinions were divided as to whether the forum was the right place to bring this up. Mods were still a new innovation and their main job was to pause/unpause games and ban cheaters.
Eventually mods became more active with regards to cheating accusations and talking about ongoing games. Initially there were no penalties but these were introduced before too long. Otherwise the forum was pretty much anything goes.
Over time the mods have become stricter. The recent controversy concerns "offensive material". An example of this is don't post links to porn sites - this is no brainer, and I agree it should be banned (but I don't think the mods need to actively investigate this). But this rule has been extended to satirical pretend links - which don't link to anything, on the grounds that mods have to investigate, and modern browsers makee "suggestions" to actual sites. Plus the there seems to be confusion about what constitutes pornography or "offensive material". YouTube film clips by Miley Cyrus and Robin Thicke have been deemed "offensive"... whoah I think we are getting into some pretty strange territory for a site like Webdiplomacy, bordering on the ridiculous. Or maybe I am a moral degenerate?
I have been told by a senior mod that these recent changes are in-line with Kestas wishes. If so I wonder if he has fully thought through the consequences. "Offensive" is extremely subjective. Is Kestas really offend by Miley Cyrus? Has Kestas considered the extra workload that the mods have to take on,and the extra flack they have to deal with. Does he really want have to deal with this extra "appeals process".
I think this site works well because it is "lean", especially compared with other sites. The game software and forum have relatively light server requirements, and the site requires relatively light administration.
My concern is that all these recent changes are going to mean a lot more effort for Kestas, and since he first created this site as a hobby when he was barely out of school, and since he does not make any money from it, he will eventually decide - "you know what... I can't be bothered". The chances are he will eventually decide this (hopefully many years from now), but I think the less effort this site is to maintain, the farther in the future that day will be.
Another reasons I think this site should be "lightly moderated" is that the structure of the forum doesn't really lend itself to moderation. Posts can't be edited by users or deleted by mods. Thus the only tools the mods have at their disposal to "clean up the forum" is to lock entire threads and/or penalize members.
This why I urge people to vote for a "lean" lightly moderated site, don't let it become over-moderated (fat and bloated, like in Elvis in the seventies). If you don't like a member, mute them. If you don't like a post, don't read it. This is the webdiplomacy tradition. Its a good tradition.