I'd have to agree with the idea that it was a paradigm shift that happened back in the days of 2e.
On a personal anecdote level, which is yes, largely useless, 2e happened around the time that a lot of us red-box kids were going off to college. You know those famous hints of "experimentation" in college? It became easy to try a lot of different game systems, and figure out what you liked best from each. It also meant you were exposed to a lot of different play styles. In our case, when the dust settled, we were entrenched in a few ongoing games of D&D, Champions and Vampire. Those informed one another, so our D&D swiped elements of long-term character play from things like Aaron Allston's Strike Force or Vampire's advice on Storytelling.
These days, I've noted that I can really only talk some of my players into a one-shot if they really enjoy the game system -- the specifics of rolling dice, what you do in combats, etc. Otherwise, "it's time wasted that we could be spending with our regular campaigns." The more long-term campaigns you see disintegrate around you before closure is reached, the more that attitude is reinforced. Us having been through a few moves, my wife in particular is particularly resistant to spending time on disposable characters to see if she can beat the intellectual puzzle of a killer dungeon.
I also think that the old "bragging rights" aspect of beating a meat-grinder is mostly gone these days; the more fractured and factional the hobby base gets, the less people care about sharing war stories. Further, the less interested they are in even trying something that "that other guy" likes. The virulent partisan for a favored edition or play style does a lot to keep others who hear him from giving his edition or play style a fair shake. It's true for all kinds of play (as WotC's marketing may have discovered) and the meat-grinder is no exception. All it takes is one toxic fan.
While I'm at it, I think that the challenge of the meat-grinder is one of the areas where video games can effectively compete with tabletop RPGs. Even if the number of potential solutions to any given problem is reduced, the raw question of "Can I beat this location?" translated very well. Demon's Souls is talked about in the same tones of voice as the Tomb of Horrors. So you get a very similar sense of intellectual challenge and emotional catharsis (rolling up a new character and restarting a level aren't too far apart), but the video game is more convenient by far. With the intellectual and emotional payoffs so similar, preferring the tabletop to the video version is really a matter of taste.
Short version: I agree that the meat-grinder probably lost popularity in the early '90s. I think there are several factors that keep it largely at niche appeal in the present day as well.
