Not dead, but definitely on life support. Here's how I figure it:
First School of Hip Hop (1980-1989) - This is when hip hop was growing out of the disco scene. MC Hammer, Run DMC, etc. Mostly underground for this decade, but gaining in popularity.
Second School of Hip Hop (1990-1999) - Golden age. Went more mainstream, but saw a lot of good performers and music in that time. Tupac, Everlast, Jay-Z, etc.
Third School of Hip Hop (2000-present) - The decline. Mainstream dominates, but with poor music, bad performers, and too much big business involved; underground is practically unheard of. Too many artists to name, and few even worth naming.
My guess is the Fourth School will start up next year; people are so sick of what they hear on the radio they'll revert to underground music, now more empowered via the Internet. With the corporate machine out of the way, some of the old glory of the genre will be restored, ushering in a silver age.
Or maybe hip-hop will die. And the void will be filled by 21st-century pop, which ironically is even worse.