Lack of participation shouldn't be disciplined. That's ridiculous. As some have said above, if a staff member has consistently failed to fulfil their purpose and is showing no sign of rectifying that, then they should be removed from staff to make room for a member who is more willing or able to contribute.

In terms of activity, as long as a staff member can be seen to be doing something on the forum, by staff and non-staff alike, it's okay. Theoretically, I think it'd be find to have a CK who just mods the forums, contributes to the frontsite etc., and doesn't post at all. Obviously it'd be a good thing if they were an active member on top of an active staff member, but it's important to distinguish the two.

With regards to encouraging participation, there are two sides of the coin. As I said above, an acceptable CK is one who does their job and nothing else. In this sense, I don't think CKs need encouraging. You're either going to do what you've been chosen to do or you're not. If you do it, great, good job, thank you for helping with the site. If not, you get KILLED have those responsibilities taken from you. This might seem a little militant, but I just don't see the point in putting extra effort into rewarding duty. Presumably, CKs and Admins are in those positions because they want to help keep EoFF running smoothly, so knowing that they've worked towards that goal is its own reward. Plus, you have a nice shiny title that increases the size of your e-peen by up to 400%.

Of course, acceptable CKs aren't the best thing ever. It's much better to have an excellent CK who's active in the forums as a member as well as a moderator. One way to encourage this is to just alter the "qualifications" for Knighting, which is kind of what you do anyway. Round One was a perfect example of checking how interested or committed to the forum each participant was, so a refined version of that for non-competition CK decisions would definitely help with determining how active a member will be. I will add to and clarify this later today, but for now I have a work.