After the patches to this current event, the diminishing code has certainly been added to the Crown Pavilion Area / Zone.
But there are still many clueless folks still advertising to farm Destroyer Area for T6 mats / lodestones . Either that or they are misleading the rest to help level up their new characters. Many of my guildies have lvl 50 alt characters now after starting them 2 days ago and zerging the trash in Crown Pavilion like it is WvW.
The diminishing Returns Code penalty you for farming in the same area and causing your loot to be trash. The time before it kicks in is about 30mins to 1 hour.
Note that the loot that you get from the champion boss bags have code to give u masterwork loot minimum usually but the diminishing code may be causing you not to have chance to upgrade to rare / exotic or mats. Hence farming mobs in between champion bosses spawning may have a bad effect of causing the loot you receive from loot bags to be worst.