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Just moving this discussion here from the trading thread ...
Anyway, it seems that the problem lays in the fact that mobs shut down their AI if they are more than 16 blocks away from a player. The reports I have been reading (no links, just some random googling, sorry) seem to indicate that mobs still spawn, but just don't move around. So, pistons or water is needed to 'flush' the grinder.
I'm hoping I can augment my existing mob tower without too much trouble, but if not, then I propose we pool our resources and build a decent high-output community grinder.