To answer the latter first, yes, yes they do. With regular tournaments and new card releases, the online community playing Magic the Gathering Online has remained strong.
And with good reason. The lock in to Magic the Gathering Online is huge. The digital cards cost real money, and while Wizards of the Coast will send you out a deck of cards as a gift if you complete a collection, doing so is a serious investment.
You also pay real money to play those regular tournaments, and win real ranking points. Gain enough of those and eventually you'll get to join the Pro tour, which still rivals Starcraft in Korea for professional nerdism.
So why do people continue to invest in such a hobby? After all these years, Magic the Gathering Online doesn't look like much, and the lobby system is a blast from the IRC era past.
Getting involved in the game for the first time is anything but newbie-friendly too, with no real tutorial for introducing new players to the very complex ruleset, and winning games (friendly or otherwise) at first is very difficult, as your opponent is probably very, very good.
Additionally, the same criticism applies to the online game that applies to the original card game - people who spend more money have better cards, and win more easily. It's anything but a level playing field.
Despite these criticisms, Magic the Gathering remains the greatest example of a collectable card game, and the game translates well to the online environment.
Your fellow players are friendly, and surprisingly for an online game they tend to be fairly magnanimous in defeat. The core rules, once understood, are exciting and endlessly playable, and there is a definite thrill in opening those packs of random cards, even if they are just digital.
So despite its obvious age, Magic the Gathering Online remains an experience as compelling as a World of Warcraft. Being able to log in at any time and find a match somewhere is an added bonus for those of us that are sometimes too time strapped to organize a beer and Magic night with friends.
Just be aware that it's going to cost your bank account as dearly as Magic ever has if you plan on taking it seriously.