Well yes, it is a fair point that India pla way too much cricket. But the fact that they have remained mostly successful in ODI and T20 cricket since then suggests that the problems are more with Tests themselves than cricket generally.
The batsmen struggle to buckle down when conditions aren't easy, Sehwag being the perfect example. He has a shockingly poor average outside the subcontinent if memory serves, somewhere around 30 I believe, because he has absolutely no application. He just swats and swipes at everything, which is brilliant when it comes off on flat pitches and mostly leads to India running away with it from very early on. When it's totally inappropriate to the conditions though, like with a swinging new ball in England/NZ/SA for example, he almost inevitably does nothing for entire series at once, and he gets away with it because people say 'oh that's just how he plays'. I think it's symptomatic of most of the current Indian top order, Gambhir, Pujara and (sort of) Tendulkar aside.
On top of that Tendulkar hasn't been scoring anything like the required runs to justify his place in the side, and if he wasn't Sachin Tendulkar he would have been dropped for Rahane about 12 months ago.
The bowlers look so average too. Zaheer is still a very good bowler, but he is now 34 and time waits for no man. He's certainly not the player he was 18 months ago and without him in top form, the Indian attack looks very weak. Sharma is ok too but seems to struggle in the field and with his confidence.
Ashwin is just a nothing player, can sort of bat a bit and is an ok spinner, but he's not doing anything that Herath can't do better and Herath is certainly no Murali. Ojha is ok, but really nothing special and the fact that he is the main man for the Indian attack is a damning indictment. Harbhajan is an absolute shadow of the bowler he was too, which is bizarre as at his age he should just be entering his prime as a spin bowler.
And finally Dhoni. Terrific, brilliant limited overs player who lends an ODI/T20 side fantastic balance, but he can't build an innings well enough to play in Tests, certainly on his form the last few years, he is frankly a pretty poor keeper and with his drops and byes must cost the team probably an average of 40-50 runs per Test. And as a captain he seems to get bored of Test cricket, he lets the game drift far too much which you can afford over 50 overs, but not over 5 days of Test cricket.
I don't see what playing less cricket would do to combat those problems, unless that means cutting out 80% of the limited overs stuff to play more first class cricket.