I have 3.5 Faction Affiliations (pre Faction War)

The points don't fade, they are always permanent. The idea is that if you get a penalty, the only way to get the points back is by doing criteria that earn you points.

Of course you can always handle it however you want. But I don't believe the rules say anything about them not being permanent. Although, if I'm using affiliations for factions like this, I definitely would not allow lost points to be regained any other way. Since factions are more of a belief system then a guild, then doing anything that earns a penalty would be going against your belief; which means you don't really belong with that faction. That's my take on it anyway.

As for stacking bonuses, they do stack. I tried to use things that would not be super easy to just rack up on points. And anything that was easy, I put a limit on how often you can do it to earn a point (1/month).

I know some people would think, "Hey that's easy, I'll just have my character go out and recruit 1 person a month all year!" But I require that every single one of the criteria be played out in game. I won't give any points during downtime. Faction abilities are supposed to be a reward for roleplaying. I see it as a way to encourage roleplaying and to get people interested in playing as a member of a faction. If the DM just used them as a way to improve a characters stats, there are much easier ways to do that then bother with implementing affiliation rules.

And if you're the DM, keep in mind that it's up to you when they get to accomplish a criteria. If they go out to find some dead gods in the Astral, if you only want them to get a few points from that, then don't throw 10 dead gods in their path that session. Just use however many you're comfortable with. Same thing with recruiting. Just because PCs can recruit 1x/month doesn't mean they'll actually find NPCs willing to be recruited.

One other tip that I learned from using these rules is to explain to the players that these are bonus abilities for roleplaying. They do not cripple a PC in any way unless you choose to cripple it for roleplaying purposes. Sometimes a player will say for example, "I have a particular build going (maybe for a PrC), but this faction says if I don't have a skill rank in these skills, I can't get a point for it. But I don't want to put points in those skills. That's not fair!" If they care more about their PC build than being as high ranking a member as they can, there is nothing wrong with that. Any little advancement they do in the faction is still going to be an improvement to their PC. Not earning as many points as they could will not cripple their PC. All it means is that the PC is not as dedicated to the belief as someone else might be.