This is definitely a really tricky issue. I know I would personally like to see less name squatting (it happened more so on LJ, but the number of times I've thought up a great username only to find that someone registered it years ago, and never did anything at all with it...), but how to actually stop it...that's a tricky one.
I do like the idea of making a number of restrictions per week/month/whatever. Even for rpers with our large numbers of accounts, I don't think it's too restrictive. You can easily just wait until you can make new journals again, and plan around that. The only trick there would be people moving over from LJ or somewhere else, or in the case of new games starting up that need a number of NPC accounts. For that though, having it kick in after you have a set number already might work better. Although the question for all of this is also how do you track how many accounts people have? If it goes by email, people can easily get around that by using an alternate. And I know all of my accounts have my email set as myaddress+username@gmail.com, so I can use gmail's filtering. Whether or not the system can pick up that they're all actually going to the same email, I don't know.
Something else to consider might also be making it easier to give up an account and then make it freely available. Like, you have to pay for any deleted usernames, which kind of acts as a disincentive if you have a username a friend would like, and you'd be happy to give it to them. The only way to actually do so without making them pay money is by handing over the account's password. It also takes a while for purging to happen (I'm don't know how long exactly), so that also adds to the disincentive. Perhaps having some kind of system that could allow people to legitimately transfer usernames securely - and would allow Dreamwidth to properly regulate it and make sure that no one is asking for money - might help. Either that or remove the cost of taking up a deleted username (although I imagine there must be some reason why a cost is needed for that?)
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I do like the idea of making a number of restrictions per week/month/whatever. Even for rpers with our large numbers of accounts, I don't think it's too restrictive. You can easily just wait until you can make new journals again, and plan around that. The only trick there would be people moving over from LJ or somewhere else, or in the case of new games starting up that need a number of NPC accounts. For that though, having it kick in after you have a set number already might work better. Although the question for all of this is also how do you track how many accounts people have? If it goes by email, people can easily get around that by using an alternate. And I know all of my accounts have my email set as myaddress+username@gmail.com, so I can use gmail's filtering. Whether or not the system can pick up that they're all actually going to the same email, I don't know.
Something else to consider might also be making it easier to give up an account and then make it freely available. Like, you have to pay for any deleted usernames, which kind of acts as a disincentive if you have a username a friend would like, and you'd be happy to give it to them. The only way to actually do so without making them pay money is by handing over the account's password. It also takes a while for purging to happen (I'm don't know how long exactly), so that also adds to the disincentive. Perhaps having some kind of system that could allow people to legitimately transfer usernames securely - and would allow Dreamwidth to properly regulate it and make sure that no one is asking for money - might help. Either that or remove the cost of taking up a deleted username (although I imagine there must be some reason why a cost is needed for that?)