I really dont think so. Seeing 700 people at the saturday linebattle makes me believe exactly the opposite.
You might have the impression of that because of your timezone, maybe.
Well it's what usually happens to most new games like this. When a game is released, there is a HUGE surge of people that want to test out the game and see if they like it. After a while (about a month or 2 months) the people who don't like it as much start dropping their play, which moves the player population to the standard "stable" player base that you see most of the time.
Three times more people playing now than Mount and Musket. Some people will come back too, either after a break or when a friend sucks them into a Regiment.
So yes, the player base is down or stabilized after the newness wore off. Also, a great number of the population would just appear in community events like linebattles or be online in the weekends.
Summer will hitting soon and if your British and want to have even a tiny bit of a social life and want to see the sun you'll understandibly be outside in the evening.
Numbers won't decline as the gaming industry seems to content chasing you up to either grind or purchase your fun in most multiplayer FPS games anyways.