Really? I thought Reddit went downhill about year and a half ago. More users = diluted content.
I was almost surprised when I saw a Paris Hilton story hit the top not too long ago. I'm eagerly awaiting PG's new news site.
I have a suspicion that most if not all of these communities go downhill when the number of people involved starts to really go north of the "monkey number":
http://journal.dedasys.com/articles/2007/06/11/dunbars-number-and-online-communities
As someone comments, stumbleupon is a little bit better, because instead of having one home page for N people, which simply cannot scale, you are more closely connected to people who share your interests. I'm not sure how that works out for news sites, though.
Part of the problem may be that, initially, concentrating your user community might be the only way to go beyond a critical mass of users, but then as growth continues, you do want to spread people out.
But news.yc definitely does not need subs. It IS a sub and nothing else.