I headed down into the sewers in Vivec these past couple of days to get the achieves for the holiday event. Over a combined 4 or so hours, I saw a grand total of maybe 20 players from all 3 factions. IC is dead.
Making it a zone of its own with a separate queue might actually liven it up a little, since all players would go to the same instance of it. As long as you could queue into IC while waiting for your chosen campaign queue to pop, like you can load into a guest campaign now while waiting for home.