I was going send a long reply to Rocky and others' theory about the FAW and Caerau but "Ianto" said nearly all of it for me !
It's not the FAW, it's the three problem areas he identified. viz,
(a) Sufficient players of ability in your locality.
If you haven't got enough of them , you need-
(b) Enough money to pay players to come and play for you.
If the money runs out, you are in trouble
and, finally,
(c)you need people to raise money and run the club.
Look at these clubs who have dropped out of the League or folded since 2001:-
Porthtowyn, Maesteg, Gwynfi, Garw, Llangeinor, Blaenrhondda, Ferndale, Pontyclun, Abercynon, Tondu, Pontlottyn, Blaenavon and Fields Park/Pontllanfraith.
All from Valley areas where there weren't enough good players locally and where the clubs couldn't afford to pay players to come and play for them and also sometimes couldn't get people to help run the club.
The effect of all this is that the Welsh League is contracting to an area bounded by the M4 corridor from Port Talbot to Newport.
Nothing to do with the FAW or Welsh League Committees , League organization or pyramid systems- just a lack of money and people to run the clubs.