I am not sure I agree 100% but do agree there are challenges.
I think it ismore complicated than bring back lugged steel frames or blaming the MTB.
Being old enough to have seen a lot of this (USA centric) bikes have always followed styles/trends kids want what is perceived to be cool. The difference I think is that since the mid '60's many styles and trends have not been practical as transportation. I personally would put the inflection point at introduction of the schwinn chopper bikes. Before that bikes were pretty much.... single speed coaster or English racer (3 speed). Most kids had baskets on their bikes....and it wasnt geeky.
the choppers were pure style, and fun to wheelie, but not fast or good for long distances. Then came the 10 speed craze, then mountain bikes, then bmx, then cruisers and now I am hearing that kids are wanting the fast ... road bikes. A lot of style, a lot of specialization, and some better suited than others for going places.
Quality/cost is an interesting aspect. The $90 ten speeds of the early 70's were heavy and had lots of steel (ie ready to rust parts) but on the whole they were better built and more reliable then todays low end big box bikes. On the whole I think people were spending more money relative to the costs of the time for low end bikes than than they are for low end bikes today. And a big box bike that dies quickly can't be used (I have neighors who have several big box mountain bikes...all dead due to low end components failure)...what is working is a single speed cruiser and an old trek hybrid
Location makes difference.....we have a lot of streets that are very bike comfortable...but there are others I avoid.
I think overall hyperwareness of "dangers" in the world affect how parents deal with kids and freedom....ie we let our 12 year old bicyle 1.5 miles to a summer camp (local streets, cell phone, saftey lecture, very 'safe" area, business close etc) and many parents i know are horrified at the concept.
But on the whole, it think the key thing is example..... I commute when I can, and my son commutes with me (even if he has bailed this week due to homework and being a wimp about the cold
) I do as many errrands as I can on my bike and often my son is with me...so he is familar with the concept of a bike as transportation, not just fun or workouts.
And exposing kids to efficient bikes helps also. I fixed up an old univega for my son....he thought it was just "dad being a bike nerd" and vowed to only ride his BMX, until he rode the univega..and realized a how fast it was (fast always is cool) and how much easier it was to commute and he hasn't ridden the BMX since
On the whole, I am seeing more kids biking to school this year...... so i don't think it biking is dying get...it is just waiting for a new cool cycle.