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Yup, no more boxes after lvl 5. Nice reward for working hard.
The announcement says "Once your village is maxed out, you will stop receiving this quest", which I don't remember reading before (and I read event announcements carefully). The official post in the News and Announcements forum was also edited shortly after you made this thread. Something smells fishy...
They did not but I'm quite sure it wasn't due to inactivity. Otherwise they wouldn't have returned my progress as the system would've been working as intended. Zingerman has also mentioned above that the progress he lost was obtained only a day before.
I think it's safe to assume it was a bug/error from the maintenance, so if you do decide to have your progress fixed I'd suggest taking a screenshot of the skill afterwards, in case the error reoccurs before you manage to master and advance the skill.