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As a short story writer (almost none of my works exceeds 35 pages) i can tell you that they are neither outdated, nor intrinsically do they have something that makes them automatically less artistically significant. As others have said there is enough crap being produced in all styles and lenghts :)
Also there is a market for short stories. Here for example a number of publishing houses only request this form (although obviously most are interested in novels).
As a reader, I prefer whatever fits on a web page without too much scrolling.
So if my reading habits are like those of others, this might suggest that the short story is not dead, unless it is a very long short story.
I reckon there will be a resurgance of the short story with eReaders. But apart from that, many people I know lead such busy lives that they never manage to finish a book and instead prefer books of collections of short stories
It is almost impossible for a writer to get short stories published today. Before WW11 they were almost de rigueur for writers such Hemingway, Fitzgerald, Forster, Hardy, Maugham etc. etc., who were all noted practitioners of the form. It is strange that, given that peoples' attention span appears to be much shorter and instant gratification rules the day, short stories are not even more popular than previously.
It’ll never work.
Yes it will - you’ll see.
Or not, if it does.
When it does.
And when is when?
After this final adjustment...
He put the spanner down, placed his hand on the lever, and they looked into each others eyes for the last time.
And together they became invisible.
There you go. One of the best short stories ever written.
The fact that I wrote it... well, that's got nothing to do with it.
Intrigue, romance, sci fi, tension, mechanics, character development, Kapow climax - it's got eveything.