I have recently quit WoW, and I dont think that either of those is the problem with WoW. Paid transfers are IMO a good thing, they may have a few too many lower pop servers, but I think that is more a function of loosing subscribers. Neither are raids too hard, unless you are just talking about the hard modes, which I would agree with.
The biggest issue they really have right now is that they killed the leveling experience. They will not get any new people when what people see is that this game is easy enough for a toddler to play. Any class at any level up to 80 can kill an elite mob of their level, something that should at least take a pocket healer, if not a party. In the past, if you found yourself either on a bad realm or unable to progress in raid content, you could always level a new toon, and play a decently satisfying single player game. Now you would rather just unsubscribe than reroll.
The second problem they have is the whole concept of hard modes, which they have gotten locked into. Players want some form of story progression. Quickly progressing through the current raidbosses only to have to fight the same raidbosses with more health and damage is quite simply boring. On top of that, for many of the hardmodes, success had little to do with ability and much more to do with whether or not the boss randomly does two things in a row that automatically kill at least one person, which would cause DPS to be too low to kill the boss. Boss hits everyone for 80% heath, boss hits specific player for 50% heath .4 seconds later. Everyone on vent was frustrated, but everyone knew that it was the designers' fault, not the player. RNG FTL.
The final problem I'll mention and what killed it for me and many in my guild were daily quests. For many of us these are the straw that broke the camel's back. Blizzard had plenty of feedback from the Argent Crusade faction grind that players don't like to be forced to unlock crap with repeatable dailies. They basically copied that exactly for the Firelands patch, without putting in any way around it. For instance, while there were repeatable quests for many factions, you could just wear a tabbard and do 5-mans to grind rep, which was much less painful. With the Firelands patch Blizzard was basically saying to us, "Hey I hear you enjoy doing chores!"