Infinite Loop is also saying the Mac mini may be dead.
I've got to disagree with them where they say “Pair it with a 24" LED Cinema Display, though, and you might as well buy the 24" iMac.” Not to slight the iMac, but there's several reasons for preferring the Mac mini + Cinema Display combination.
First, you can update the computer without having to buy a new screen, especially now, with Apple having just begun the rollout of a new Cinema Display line, with the new DisplayPort connector.
On the other hand, if you want both a stationary machine and a portable, the combination of a Mac mini and Cinema Display allows you to use the Cinema Display with your MacBook or MacBook Pro, something you can't currently do with the built-in display of an iMac. Maybe the new iMacs that are rumored to be due soon will make this possible.
Perhaps most importantly, the Mac mini can serve as a starter machine. If what you really want is a Mac Pro, but you can't afford both it and the screen right now, you can start out with the combination of a Mac mini and Cinema Display, and then a year or two later move up to the Mac Pro, continuing to use the same large, bright display.
So I'm going to go out on a limb by speculating that the Mac mini, as a product category, isn't dead at all, but undergoing a major reworking. Maybe the name will change. Maybe it'll resurface as the Apple TV-II or as the AirPort Server, but there's just too many ways a lower-end Mac without a built-in display can leverage the rest of the product line to let it disappear altogether.
That the Mac mini hasn't sold so well thus far can be attributed at least in part to lagging updates and a Cinema Display line that was long overdue for refresh. If brought up to equivalence with the consumer MacBook line, and kept there, it should sell well enough.