It's almost dead. A couple of new modules this year, so there's some life there yet.
But the community never took off quite like NWN1, I think NWN1 still has more new stuff coming up than NWN2.

And if you're not an established modder, you're really hard pressed to find any kind of audience for your work.

I'd say it's couple of years too late to jump in. :(

The community is still active. New modules get released constantly, albeit slowly, because it takes much more time to make a good module in NWN2. The NWN2 Toolset is a bit harder to get into than the one for NWN1, but it is also much more powerful.

If you are interested in making modules, then I suggest you go to the Bioware-forums for NWN2, especially the Modules and the two Builders sub-forums. There are plenty of modders, that can give you advice on how to get started.

Oh good, the chap working on a Dragonlance mod for NWN2 is back on the case again:

http://dragonlancenights.com/

so you would still recommend learning to use the NWN2 toolset? After the KS shenanigans with Shadowrun, Im no longer as confident in their final product and toolset. That pretty much leaves me choosing between Dragon Age and NWN2 for modding. Unless Im missing another traditional RPG with a toolset that has been released recently?

With my experience, you can take 5 months in Dragon Age, 2 months in NWN2 or a few nights of modding in NWN1 to make the same story.

I think that's why the NWN1 modding community is so strong. You can make a lot of story without a life investment.

If you have some friends who want to play your story in NWN2, then I'd say go right ahead. But I doubt many people will play your story if it's made in NWN2 today. You can, of course, always send us a link and some GOGers might enjoy playing it.

Is the original NWN modding community still active or have they all moved to NWN2?

It's still relatively active. Folks are still building new modules, making new content and playing campaigns. But it's at a much, much slower pace than a few years ago.

I don't think that the majority of players went to NWN2. I think they just disappeared. The market is open for another NWN1 -- a place where you can tell your tales without a huge load of work.

I imagine that if you finish your game in the next year that you'll have maybe a dozen people try it out. It's not much, but perhaps more than you'd get from NWN2. I'd still recommend building it only if 1) You must because of an inner determination, 2) You have friends you want to play it with.

If neither of those are true, you may want to consider building it on a different platform (like RPG Maker VX Ace or wait and see how the Foundry toolset will play out for the Neverwinter MMO ( http://nw.perfectworld.com/about/foundry )).

I would never discourage anyone from modding. I would love to try your mod when finished and give feedback and I am sure a lot of other players would too. Go right ahead and this goes for any game the more modders and modding going on the better the gaming experience for the rest of us.