Well, yes, but it was with good reason. Everybody's recoveries were too good, and Mewtwo was apparently OP (I think this is debatable, but as long as Mewtwo's balanced, I'm good). So, yes, everybody was nerfed, but it was all in an effort to make the game as good as it can be. I wouldn't say it's dead, at all. As a matter of fact, I would say that it's more alive than ever.
...Or, at least, it should be. The reason PM isn't seen on the competitive scene much these days is because Nintendo is really cracking down on them. If that weren't the case, I believe PM probably would have grown substantially thanks to 3.5.