At any given instant a spherical shell of photons is released by a star. As the photons travel outwards the sphere increases in radius, and also in surface area. The number of photons per unit area decreases with the square of the distance from the star. That is why less than a thousand stars are visible in the night sky, and why you need a telescope to see more. It is not that the photons lose energy, there are just fewer reaching us over such long distances. This is actually a "loss of signal", as measured in Watts per square meter.

Also, I dont' think the expansion of the universe affects starlight, because individual stars are too close, i.e. still within the Milky Way Galaxy. You may only notice the effects of inflation of the universe when observing very distant galaxies, which are nothing but points of light themselves at such enormous distances. What inflation does is redshift the photons, stretches them a bit. The light source, the galaxy, has a relative velocity travelling away from us, so the light would be redshifted no matter how far away we were from it. It is just that inflation is more noticable at such distances, so the redshifted light has to travel further before we receive it.

That's how I understand it anyway.