It's not that it's dying or fading, it's just that the "community", or however you want to put it, is scattered and unable to find a place to properly congregate because of varying tastes or just a general unwillingness to move.
Roleplaying is a growing hobby, mostly because it's easier to do it and easier to find places for it. Finding a special place that caters to you will be rough, but it's easier than it used to be.
It's hard to join a pre-existing group, mostly because the cliques have already formed and casting away the few problem-people you have will cause drama and does not absolutely guarantee that more sane roleplayers will fill the gaps.
I used to go to a rather fun and entertaining MUD that has been running for quite some time with basically no progress over a decade, and it's only recently that they've buckled down on both story and a diceroll combat system related to it.
The playerbase is crap and ungrateful, but the immortals rarely, if ever, ban someone, the last being a desperate attempt to keep players coming to them since a longtime nuisance was trying to drag people to their own MUD.
I decided to leave after my long stay, mostly because of their unwelcoming nature. Each time a new character comes around, they notice them for about five minutes before they go back to their slice-of-life-and-look-at-how-many-husbands-and-wives-and-children-I-have roleplay.
Roleplaying is a growing hobby, but it only seems like it's dying because nobody wants to bring anyone else in.