It seems to work 'OK' if there's a smaller community with a group of core dedicated users (which the moderation staff has a large overlap with); however even then it works only if there is a clear and unambiguous mission statement and laser focused guidelines of 'on topic' contributions.

I'm not familiar with Craigslist, and have only very limited observations of Reddit; but I think these sites are generally the closest to a sustainable model.

In my experience they let 'local' moderation do it's thing, sub-communities individually have their own flavor and groups; with active and positive ones seeing the most success. Moderate ones tend to languish until they trail off. The really bad ones get globally flagged and killed.

I think a logical next step might be 'supersets' where different user areas subscribe to a kind of moderation guild.