I agree that this is an issue we need to deal with, and I'm glad this discussion is happening. I'm not sure switching to a biennial conference is the right solution, though. The usual rule-of-thumb is that people participate in online communities for about 18 months (I'm not sure how accurate that actually is, but it seems plausible to me). Having Wikimania only every two years would mean a lot of people never get a chance to attend one. Having a mathematics conference only every 4 years is fine because the typical working life of a professional mathematician is about 35-40 years, far great than the typical working life of a Wikipedian.
One alternative solution might be to make more use of chapters. We have a lot of chapters that are rapidly growing and professionalising. Give it a couple of years and we'll have a significant number of chapters that could organise a half-decent Wikimania without much difficulty at all (organising a fully decent one would take a bit of effort, but you could get away with a Wikimania that was no bigger than the national events that chapters hold on a regular basis anyway, you just have to add on the complication that comes from it being an international event).
Wikimedia UK, for instance, is planning to hire an event manager in the near future to organise our national events. Once we've got them, we can just tell them "organise a Wikimania" and a large amount of the more routine work would just get done. The volunteer team could then concentrate on the interesting stuff.
We may want to consider a rule that only chapters can organise Wikimanias (I'm only proposing we consider it at this point, I'm not sure I'm in favour of it). It would increase the liklihood of good quality Wikimanias. The biggest downside is that organising a Wikimania can be a good kickstart towards founding a chapter (I think there are some precedents for that, although I can't remember which chapters they are) and we would lose that. I don't think the limited number of venues would be an issue, since chapters are being formed at a pretty impressive rate and there are plenty of existing chapters in countries that have never hosted Wikimania.