Two difficult things happened then: dealing with the crowds and, well, he lost to Federer. The crowds got him angry and hurt that is for sure, and the loss to Federer did made him doubt.
He had a "Is it possible people do not love me as much as I think they love me / Am I as good as I think I am?" moment.
I don't like the guy, but seeing him stalled like this for so long is kind of sad. He's better than this. But to bring back the cockiness could also turn the crowd against him some more. Would Djokovic be happier winning more but less popular with the crowd?
I don't think that incident in 2008 was the breaking point because he played some solid tennis even afterwards, most notably winning the TMC.
Either way, I think he somehow got really uptight especially after winning AO 2008.. He wasn't the same joking Novak we all knew in 2007, and I think him trying to be a "serious/mature champion" has made him put extra pressure on himself and now he doesn't swing and play as freely as he did in 2007.
Yes he played extremely well in Australia when he won it, but I think for an overall consistent year, he should go back to how he was in 2007 mentally. Or then again, he doesn't have to change because despite what most say, Novak's performance in 2009 and so far here in 2010 is still very good. Unless 4 GS QF appearances, 2 GS SF appearances at the slams, 4 MS SF appearances, 4 MS F appearances, and 1 MS win isn't good enough, then I don't know what is. We can't except Nadal-like, let alone Federer-like, consistency.
You can argue that he has lost some bite on his groundstrokes/serves or that using Head has screwed him over, but who knows whether he needs to revamp his whole game, just get some big matches under his belt, or just adjust slightly, because he is clearly still in the top 4 for a reason.