It seems like a chicken and egg problem: you need more members to generate more activity, but you need more activity to attract more members. How do you get past this hurdle? If you are promoting the community well a steady influx of new members will help, but its not enough; you need to keep these folks coming back for more. A good reputation system can give members visual evidence that their efforts are appreciated and get them more and more involved in your community's success.
And as communities mature reputation becomes more important, not less. With a lot of activity going on new members want to see that their voice matters, and existing members want to continue to be appreciated for contributing. No one should ever be stuck in a rank with no hope of getting out, no matter what level they are at; keep them moving in their path as long as they are still participating. That's why you need to continually reward members both for their volume of participation as well as the different ways they contribute. Keep them involved and coming back.
Reputation is only one part of how you recognize members, but it is the most persistent and visible in the community. So it makes sense to spend time developing and fine tuning your reputation system to get it right.
How are you encouraging new and existing members to become progressively more involved in your community? Or are your members stuck in a dead-end rank?