I'd say it's not dying off by any means, at least not in the realm of deathmatch-style gameplay. (From what I understand, split-screen co-op is somewhat of a rarer bird as far as consoles are concerned, although you certainly have heavy hitters like Halo and Gears of War that promote it in spades.) I don't have a 360 myself, but from the games I've played on one, I know of at least a few that allow you to utilize both split-screen multiplayer and XBox Live simultaneously. And the meteoric popularity of the Wii is certainly a telling argument for people's desire to gather around a single screen and play together.
While it's true that I went into specifics in my counter-argument, at least one or two of them are generally applicable to the gaming public as a whole, particularly the majority of it that isn't of the "hardcore" mindset. The game and multiplayer pricing hold true for anyone else as well as me, and as for buying multiple controllers, I'm sure you'll find that there are a lot of people out there who simply bring their own controller(s) along when playing at a friend's; I know I do the same when playing something like Smash Brothers around here, as does my video game club. That just leaves the TV question, and frankly, I'm puzzled by your assertion that having a standard-definition TV automatically entails a massive graphics hit. It's true that an SDTV can't display graphics at as large of a resolution as HDTV can, but that doesn't affect the fact that said graphics will still be using high-poly character models, detailed textures, shine/normal/glow/whatever mapping, HDR, and whatever else is in there, all anti-aliased. To add to that, even my relatively cheap TV has a larger screen size than my computer monitor. If I tried to obtain the same graphical appearance on my computer for a title like Bioshock as I could obtain as easily as plugging in an XBox 360, I feel quite certain that my PC would quite literally burst into flames. This all becomes even more moot by the fact that an 8-year-old PC is still perfectly capable of being used effectively for word processing/browsing, while an SDTV is obviously useless for HD programming and will be rendered pretty much obsolete as soon as the great signal switchover takes place; convincing people to upgrade the former for gaming practices instead of the latter seems like a rather futile cause when you look at things that way.
I still stand by my assertion that I'm not bashing PCs as a gaming platform, but rather the faulty arguments that are often passed around to defend them as such. Trust me, I've used all the usual arguments before on a few friends who are just about console-only gamers, and every single one of them was shot down quite spectacularly; in retrospect, it was perfectly reasonable of them to do so. If you want to hold up PC gaming, by all means, do so for the modding capabilities (though even that gets a bit shaky when you realize that we're starting to see console games become capable of running mods, albeit ones created on PCs). Do it for the control scope and customizability (though, believe it or else, there are a good number of FPS gamers out there who prefer a gamepad over WASD+mouse, not that that affects their ability to use the PC). Do it for the ability to fine-tune your hardware to obtain the best performance and appearance possible out of a title. Or simply do it for the fact that you enjoy PC-building as a hobby. But when you try to toss around justifications like price and longevity that really don't hold up across the board, you leave yourself open for defeat.