I think that there are two questions being addressed here.
1) Are RPGs failing, and if so why? This includes numerous systems.
2) Is D&D still a role playing game, or is it just an exercise in rules manipulation.
Are RPGS failing, and if so why?
Are RPGS failing? I would say that it seems that with the current economy, RPGs are not doing as well sales wise. This is based off of my own observations, and I have no cold hard facts, but I have read in numerous places that the economy isn't doing as well right now. I've witnessed less products coming out, less variation in the number of new systems, and many RPG shops closing their doors. This doesn't mean that people aren't playing the game, it does mean that sales are down.
Why are RPGS failing? I think there are numerous reasons for this, and it's not just some simple answer. There are economic factors including how much expendable income people have to spend on RPGs, how much it costs to manufacture and produce the items, how well gaming stores are doing since they often push the product, how well online sales are going, and how well competing markets are doing. There are also social factors affecting the sale of RPGs. These include: the amount of free unstructured time people have to spend on gaming, how easy it is to get a gaming group together, how easy the rules are to learn, do people actually enjoy playing the game and continue the hobby, are new people being attracted to the hobby to replace those lost to attrition. Now, I can't address all of these issues, but I can point out some trends that I've noticed.
Paper and Pencil RPGs are losing to Console/Computer Games
Console games are hot. They can be played single player or in multiplayer mode. You can sit down any time of the day or night and play a game. With MMORPGs you can play when it's convenient for you. It's a higher intensity of action. There is less time spent learning the rules in order to start playing. It's instant rewards. You don't have to find a GM or a group to play in. If you add voice chat, it's kinda like doing and RPG. It's way easier than a paper and pencil role playing game in these areas.
The kids of today have less free time. Parents seem to structure the free time of their kids more. The kids seem to leave the house less, since there are so many "bad" things that can happen in the world. It's almost a culture of fear. Parents are happier to see that their kid is safe in their house, so playing a computer game becomes easier for the kid.
More rules != More Fun
3.X is a more rules intensive game than many of the console games. It is also a more rules intensive game than the way our groups played the previous versions of D&D. The more rules a system has, the higher the learning curve, and the fewer casual players you are likely to attract. The more rules, the more likely you will end up with a group of gamers that love to play games as an exercise in rules manipulation. Now, D&D isn't Squad Leader, so I'm not saying it's at the level of 10+ ranked Avalon Hill board games, but I never saw a casual gamers playing Squad Leader either.
Now, I've always felt that more rules doesn't always equate to more fun for a game. Spending hours learning rules instead of playing the game means less time that I actually get to play, and playing is where I have fun. I realize that many people view the rules manipulation in RPGS as fun in and of itself, but this isn't true for me. I suspect that there are other people that feel this way. While I'm quite happy to learn to manipulate the rules of a board game to compete with other players and to win the game, D&D isn't about winning. It isn't about manipulating the rules. It's about getting together with some people and socially having FUN! The more time that I spend staring at feats descriptions, spell write ups, skill write ups, and other esoteric details, the less time I spend doing what I find fun in RPGs.
For me gaming isn't about building an absurd character that under the right conditions can deal some massive amount of damage. It isn't about chosing the right feat chains to keep your chracter useful compared to everyone else. It isn't about player vs player. It isn't about players vs NPCs. It isn't about player vs GM. It's about having fun. Getting to play cooperatively with a bunch of friends. It's about telling a fun tale.
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