They are not happy being potbound..I had them decline also after a few years. Like you,it was outdoors..so plenty of light and water.
You might find it hard to find photos of old potted majestys with trunks in pots,so ,its not you.
At the very least...take it out,prune roots all around..and refill with fresh potting soil. You might get a few more years out of it.

I would be careful about pruning palm roots... most palms take such behavior badly, and often croak. I would NOT root prune at all if I were you... I have found these palms to actually do very well root bound, but there is a limit to how root bound (if almost no soil, this will make them yellowy, sad and somewhat weaker). They do indeed like lots of water, though, and one of the few potted palms that appreciates fertilizer regularly (liquid, preferably, and rather diluted).

The reason your palm is 'shrinking' may be that it is now exposed to better light and is making 'more normal' leaves most likely (and not so etiolated, despite being in a window with 'good light'). You could move it up a pot, but I would personally remove the smaller palm if you can (you can just chop it off at the surface so no root damage will be done). It is competing for soil space and nutrients/water and is going to be a problem someday anyway, most likely.

I don't think the little amount of exposed roots is harming the palm, but if you repot it, put it a bit deeper, or at least angle it so the base is more even with the soil surface (this will make your palm lean markedly for a few years, but it will grow out of it).