I've won Hamlet Defense a few times now, and while I have enjoyed it, it's not really the ongoing "activity" like FFXI's Campaign Battle I hoped it would be. This is mostly due to a lacking incentive structure - there is neither a self-contained upward spiral nor is there a strong benefit for the rest of the game.
Basically, the more you do Hamlet Defense, the better you should get at it and the more rewarding it should become. This is currently not the case, and here are some system reforms that I think could help it become that.
1. There should be a scaled down version for 4 players, with appropriately adjusted rewards.
2. Right now it doesn't feel like you're helping the war effort by actually playing, which… is really bad, and fundamentally undermines the point of the effort. To remedy this, I think the Hamlets should level up based on completed battle "contributions," as well as supply contributions. This would probably need to be at a lower rate than supplies to keep it from growing out of control, but I'll leave that up to them.
3. Militia Gear should be purchasable with a new Militia Credits currency type. This is awarded for any kind of contribution in addition to anima, but there can still be random gear award from the chests.
4. Militia Credits should also be exchangeable for GC Seals, so there's a constant incentive to participate and help friends out, as well as create some tension on how to spend them. Getting better gear through participation is how both the individual and greater community take part in this "upward spiral."
5. Level 1 HDs should be easier than they are now, because it's different enough from regular play that it's confusing at first and losses are discouraging players from digging deeper into the content. This is also how people can start learning, get a foothold, and start earning Militia Credits.
6. Not sure if this is the case now or not, but, similar to Besieged, the supply level should stay through HD cycles so it's constantly building if people are winning and contributing. Perhaps the battle contributions portion should drop X% every hour (higher levels drop higher percentages) during the supply phase so it's not permanently pegged to Level 5 without a lot of player effort.
Each battle lost should subtract from the Hamlet's point total, just as winning adds to it. But how the relationship between points lost and gained per battle should shift as the hamlet levels up: for example, at Level 1, winning gets you 50% more points than you would lose if you lost, while at Level 5 you'd lose 50% more points than you'd gain if you'd won.
7. In keeping with the "upward spiral" theme, wearing Militia gear should… 1) Give you the bonuses the NPCs get from DoH tasks, 2) Enhance the debuff effect from DoL classes, and 3) Reduce the impact of player debuffs from Supply losses. The more pieces of Militia gear you have, the stronger these effects should be, and these bonuses should play an important role in beating the Level 5 boss.
So there is my (hopefully) comprehensive plan to make this a fun activity for one and all.