A lot of people are anti-reputation system taking the position that since they might be gamed, they can’t be useful. Personally, I don’t agree with this approach. I think you have to be careful with reputations, but they can be useful.
Basing it on activity alone can be a good way to build the community, but eventually you need to base the reputation only on helpful or productive participation, not just everything. Cubeless uses a karma system with a heavy weight on whether answers are helpful or not, and they have separate numbers for activity and helpfulness; however, they plan to combine them into one number. They also plan to hide the number in the future and only show categories that are based on the hidden number. I think this helps, but it also helps to make the content very transparent, so that you can see the types of contributions. If you can see the people who have a lot of activity of the “good post” or “nice job” can probably be easily ignored while focusing on contributions from people who have helpful and interesting feedback.
We do something similar in the Clearspace reputation system with a combination of activity and helpful points. I also like the idea of hiding the overall number. We currently show the number, and it makes it easier to game and compete for points.
When does activity become less important to weight the currently activity more heavily than past activity so that people who leave don’t stay at the top. The really need to gradually drop off as newer contributors become more important.