I remember reading a webpage once about the life of a videogame genre. Unfortunately, I can't remember all the details (*), but the fighting game genre is now definitely in the last stage. We're even past Contraction. Now, it's at the stage of "Fringe market catered to by very few companies who have honed their craft to a fine degree, but with so many features as standard that casual play is alienated." Or something. (Also see Advance Wars for an example of another mostly-dead game genre.)
Genres can be revived - after all, that's what the original SF2 did, back in the day, but even if the genre was revived, it would be through a massive change and the games wouldn't really look the same.
Things could be interesting - after all, there's the Nintendo Wii controller, which could help in a genre revival. But that's just speculating.
---
(*) I can't remember the stages, but they were fairly obvious and along these lines:
1. A new idea takes the world by storm
2. Expansion and Innovation - People copy the original idea and add their own ideas.
3. Plateau/Saturation - Things are somewhat stable. No radically new ideas are being introduced. Minor new ideas and features creep in.
4. Contraction - Things are now too complex for the casual player, and old hardcore players start to lose interest and drift away. No new players means too much supply, not enough demand, and companies start go bust. Their market share might be exactly the same, but the market overall is a whole lot smaller.
5. Final stage as mentioned above.