I thought what damaged the brand was churning out sequels, each one half a game compared to the last.
Honestly, the whole series started declining when they moved onto the PS1 and started emphasizing graphics over story and gameplay. FF7 was such an overhyped, mediocre game, and it mostly goes downhill from there.
This is one of the few series where I'd actually welcome rehashing of old titles over creating new. What they did with FF4 DS was great. I keep hoping FF5 and FF6 are going to follow. The SNES period was the golden age of this series, they ought to look back at it for inspiration.