Shattered Kingdoms

I'm sure somebody has brought this up before, but I'm wondering why, at certain "inns" throughout the game (not the six in each kingdom) where you cannot get rested regen? Obviously it's an Inn, and it probably sells liquor just like the others.

If we could implement this into the game, it might make for some better RP, so people wouldn't be cramming together so much with unpleasant others to get rested regen.

Actually, we want you to cram as much as possible. The meta-game reason for giving you a regeneration bonus at the inns is to give you a reason to go there and have a chance to associate with other people doing the same. For this reason, we are more likely to reduce the number of inns providing regen than raise it. (As was done recently with Ayamao now that it is no longer a starting kingdom.)

But its still a recall point.

And a place with a tribunal and RP events happening there.
While it's no longer a starting zone -
It's still home to a tribunal & its conflict.
As much as staff may be trying to wrangle people to consolidate at fewer inns, this one did seem a bit early...

The specific timing was determined by a player-originated storyline.

I was a little bit on the fence about when to turn off the Sith regen. It was guaranteed to happen sometime after closing Ayamao as a starting point. When the Splitbane wanted to take a shot at the Tree, that seemed like the most appropriate time to do so. I'd say the closing actually came a bit late, though, rather than early.

I'm going to convince half the game that we need to all camp out in Sith and enjoy the lack of regen

I think until the present generation of characters dies out, it's going to be a place people come to. Especially with the events still ongoing.
It is what it is. It does make sense it changed, as much as didn't (yet). I've logged in to see veteran and newer characters alike at the Commons who are invested in things going on. Probably when Ayamao no longer feels like a 'main kingdom of the game,' or central to our RP, will the inn change be part of why we don't continue to localize there. For now, it's just an annoyance.

My question is, as these areas are falling apart politically, why isn't the law breaking down, the tribunals dispersing, and law enforcement gone?

I can't speak for the goings-on up north, but there's definitely been a falling apart in Ayamao. Law has broken down in Grahme, where they are fighting to secede from the Alliance.

The noble elves, however, aren't necessarily a breed given to devolving into anarchy just because they've hit a (really) rough patch.