Grandparent rule and residency rule. I don't have a problem with either. They are stricter than many sports, including union and Olympics who happen to have bigger events than us so I very much doubt this is anything like the real issue why the RLWC can't sell out stadiums.
It is a factor. A squad made up of foreign born players indicates little growth in that country, so few fans as a result. This is definitely a major RL problem as there are so few fans from other nations travelling to a RLWC. Unlike a FIFA World Cup or even a RUWC the burden of filling up stadiums largely lies with the host nation. An Australia vs Ireland game at the RUWC would have thousands of Ireland fans, as was the case in the last one held in Australia, this wouldn't be the case in a RLWC.
Another issue is switching nations. Taumalolo and the other Kiwi defectors may want to help grow the game in Tonga, Fiji etc. but in all likelihood they may have inadvertently affected interest in the game in NZ. Read so many comments from NZ followers who have given up. To have a player represent a nation one week and then the following week declare for another national team, doesn't sit right at all.
I'd end nation switching, plus I'd set a limit on the number of foreign born players allowed. At least 50% being home grown players would not only indicate growth of RL in a country a by product of that would mean travelling support for that nation. There's far too much of a burden on the host RL nation to sell out the stadiums. The local population are also less likely to attend games knowing they will be watching opposition largely made up of players from the same country as their own. The grandparent/residency rule is ok, but a limit needs to be set.