Think you could be right, certainly for current commercial console games. 2D will live on with home coders though, I'm sure.
Everyone said that the GBA would herald a return to 2D gaming and be great for the retro scene. There have certainly been plenty of 'remakes' of classic SNES (and amiga) games, but not as many new and original games as I'd hoped for so far.
I can only think of Oddworld on the PS as a really up to date 2D game. When this came out I thought it would start a trend, and there would be a rash of 2D platformers to follow it - but no. Even the M$ exbox sequel ended up full on 3D.
Realistic/ believable/ immersive environments are what people want today - and that's best served up in 3D. I worry though that games today are looking and playing more and more alike, and frequent and old time gamers like ourselves may get fatigued with them all.
I just hope some major developers have the sense/courage to try some different things on the consoles, especially the PSP, and some of these might be some good old 2D action. Real surprises and outstandingly original concepts are becoming less and less frequent in the commercial gaming world.
I hope with the PSP they will make different kinds of game. I suppose it will sell well enough (I know I'm tempted) for them to make niche titles for it wich are still profitable. Hand held games need depth, but also need a 'pick up and play for 5 mins and put down' style - very different to what's been served up on the PS2, XB and GC recently.
We live in interesting times...