First of all, the 1 month period is too short imho. Some people realy commit themselves to actively participate in the ladder, but for others it might just be fun to play a match from time to time. For those people it would could become a burdon if they're forced to do something every month. That's why I suggested the (automatic) inactivate option, so they can reactivate when they feel like.
About e-mail notification:
1) When they join the ladder : e-mail should contain all rules and explain completely what to do and when to do it.
2) When someone is challanged : explain to the challenged one what to do (go to the website and accept/decline) and how to do it. Tell him to contact the challeneger etc.
3) When a match is declined/accepted : notify the challenger the match was declined/accepted
4) mail to the one who didn't write the report: mail that the other player entered the match report
5) mail to the one who wrote the report: notification that the match report was accepted/declined and that the match can now be found at show matches page
6) After a period of 1 month of inactivity, notify the player he hasn't been active for one month. Tell him his account will be inactivated after another month if he doesn't react.
7) After two months of inactivity notify the player his account has been inactivated. Tell him how to activate his account again if he should feel like it.
That's what I can think of for the moment. I wouldn't give people the choice to activate or deactivate e-mail notification. Just send them
