Got to agree with Odhanan and like-minded posters here. And to pick up on Thurbane's most recent and colourful analogy, I too like to see a band in a small venue but I still appreciate it when they know how to mix their sound.
I think a problem with threads like these is that all concerned - both sides of the argument - have a tendency to over-simplify the issue when we (and please note the inclusiveness of the pronoun) have a point. I recently bought a copy of Eldritch Wizardry (OD&D supplement III) to replace the one I had and carelessly lost over twenty years ago. In the foreward, it says:
"But somewhere along the line, D&D began to lose some of its flavor... This came about as a result of the proliferation of rule sets; while this was great for the company, it was tough on the DM."
Doesn't that speak to the core of this thread? This is from a 1976 supplement. (I can hear Diaglo already. "1976? Bah!")
Whether D&D has lost some or all of its soul or not is moot. When I play - and I play 3.5 - I try to keep the spirit of the game I knew in '78 alive. Same goes for when I DM. The fact that I can create, in the new rules set, an amphibious, half-celestial, lycanthropic were-baboon doesn't change anything. I could do that back then too, if I had a mind to. Of course, it wouldn't have been called that back then and it doesn't get called that now. The fact that I have a set of rules - er, guidelines - now and didn't then is something I find interesting and entertaining but not any more prescriptive than the rules I had then. I have, after all, never played a game of any edition that didn't have at least one house rule in it.
True, I occasionally get a player turning up who has a book and assumes he can use it, because it belongs to the latest edition. But that was true back in the days when the world was black and white, too. And I have players who point to a rule and say, "Broken!" And I remind them that if they want to exploit a rule I do allow, they can bet their bottom electrum piece (they just found, to their surprise) that one of my npcs or critters will have access to the same mechanic.
I chimed in earlier with a claim that I love the new rule set and that's true. I loved previous editions, too - apart from 2e, obviously

- but how much soul there is in a game doesn't depend on the rules you use. It depends on you.