Instancing isn't the problem. The problem is that old players have no reason to help - and in the case of level-locked dungeons, actively prevented from helping. WoW, FFXIV and other games solved this with random party finders, level syncing and scaled rewards.
New content might not be needed to bring in new players, but it's definitely needed for retaining old ones, and new players aren't going to bother with or stick around an MMO that appears to be dead. Furthermore, new content also gives prospective players the impression that the game is still being cared for. What does it tell someone when they look up AO and see that the last expansion was in 2009?