Yes, perhaps that particular model of traditional animation production is "dead" (or maybe "just resting, pining for the fjords") and is not likely to come back the way it was in the 1990's. There will continue to be hand-drawn animated features , but those will probably be for a niche market , smaller indie films, not necessarily major feature animated films like 'Beauty & the Beast' , 'Aladdin', 'The Lion King' , or even slightly smaller scale films like 'Lilo & Stitch'. It's possible that there could be a break-out hand drawn animated hit again on that scale , but it doesn't seem likely, at least not in the short run. (but never say never ... things couldn't have been much more "dead" than in 1985 - '86 when a couple of films came out that I think changed everything: The Great Mouse Detective and An American Tail . Momentum picked up after those , leading to Who Framed Roger Rabbit, The Little Mermaid and beyond ...)
BUT that is not the only viable model of traditional hand-drawn animation production , and it never was the norm. Hand-drawn animation doesn't need to be "saved" or make a "comeback" , because it never really went away. I think there will continue to be smaller scale feature films like "The Secret of Kells" or "The Illusionist" , as well as more truly independent micro productions (one-person , creator driven features or features made by a very small crew) such as "My Dog Tulip" , "Sita Sings the Blues" , "Idiots & Angels" and Nick Cross's forthcoming "Black Sunrise"
There is so much hand-drawn animation still being done for advertisements , short films, games, and web applications (including iPhone/iPad and other tablet apps). And whether it's drawn with pencil on paper or using a Cintiq tablet in an app like TVP Animation , the traditional drawing-based skill sets are still essential to telling a story through images.
Here are a few projects I've seen recently which remind me of how hand-drawn animation is being used in the real world outside of mainstream "Hollywood" features:
Story Corps latest oral history animated piece , "Miss Devine" :
Clever animated advertisements animated by Jason Doll :
Music video animated by Anthony F. Schepperd for Blockhead's 'The Music Scene'.
"The Music Scene" from Anthony Francisco Schepperd on Vimeo.
TIJI Television Network "Colours" :
These are just a few randomly chosen examples from among many. IF you can think beyond "When I graduate I've got to go to work at a giant studio like Disney/Pixar/Dreamworks/BlueSky/CartoonNetwork/Nickelodeon " [not that there's anything wrong with that] you can find a world of opportunity out there for animation. (in particular the hand-drawn variety) .