This was a great review, Zig! I felt like you did a great job of capturing what once was right with the series and what now is wrong. And to answer your question, things started going wrong with Soulcalibur III. Part of me thinks that Namco just decided at that point that they no longer wanted to bother making Soulcalibur awesome anymore. I still enjoyed much of Soulcalibur IV--mostly because it was pretty and the fighting seemed to have been refined from SC3--but nothing like Soulcalibur and Soulcalibur II. Those were fighting game events. Everything since then has been full of question marks.
"Too often we enjoy the comfort of opinion without the discomfort of thought." - John F. Kennedy on reality
"What if everything you see is more than what you see--the person next to you is a warrior and the space that appears empty is a secret door to another world? What if something appears that shouldn't? You either dismiss it, or you accept that there is much more to the world than you think. Perhaps it really is a doorway, and if you choose to go inside, you'll find many unexpected things." - Shigeru Miyamoto on secret doors to another world