Basil plant is dropping healthy leaves. Overwatered? Or in need of harvesting?

actually, the main problem is that you let it go to seed. this tells the plant that it's job of propogating itself is done! when herbs go to seed to soon, the plant usually doesn't recover. i had the same trouble with my oregano a year or two ago. in the future, pick off the flower buds as they form. this actually forces the plant to grow bigger and stronger, sending out more flowers to try to propogate. you might as well harves what you can now, buddy. sorry.