Because of the odd funding system that was set up for Season 1 (Sky in the UK and SyFy in the US funding it together in return for Sky getting the show first) they knew they had a full first season of 13 episodes, and were able to plan it out ahead of time in detail, which they didn't have time to do on the later seasons. Ronald D. Moore knew whilst writing the early part of Season 1, for example, that they would find Kobol and there would be a major schism between Roslin and Adama that would eventually be healed. Some elements of the Helo/Athena story they invented on the spot, but the general idea that they would get back to the Fleet and Boomer would try to kill Adama were also planned, if not in detail. They thought the Tyrol/Boomer relationship would also take longer to disintegrate than just the 2/3 episodes it did, but that story was more or less planned from the start.

Moore was also talking from day one about the Pegasus storyline and how he wanted to do it, so when the first story they had mapped out was complete, they were able to go into the Pegasus story without much of a break. And of course they had the election storyline they'd set up in Season 1 as well. The fall-out from the Kobol story, the election story and the after-effects of the Pegasus story all led them to New Caprica. It was a fairly natural process.

Where they ran into trouble was after New Caprica they didn't really know what to do next, apart from a vague notion about the Final Five. Moore handed out a note in the scripts for Baltar and Six's discussion about the Five on the basestar that said the Five were shadowy figures based elsewhere (maybe on Galactica, maybe on the Cylon homeworld) who gave the other seven orders. Then when they reached the end of Season 3 he came up with the Watchtower song and the idea that the Five were all on Galactica just because it was shocking, and not because it made sense, and the older idea went out the window. That's when everything fell apart.

I think the biggest problem is that Moore and many of the other BSG writers, including Jane Espenson, Bradley Thomson, David Weddle and Michael Taylor, all worked on DEEP SPACE NINE, which had an excellent arc storyline they made up as they went along, and it worked really well and they decided to do the same thing on BSG. They forgot that DS9 only had a forward-moving story with no 'big mysteries' in the background that needed to be addressed. Trying to do BSG under the same circumstances proved to be a bad idea.