I don't remember many people thinking the classic was going to die this year. Many knew that a 160 GB single-platter drive would be coming out and we knew the biggest the iPod touch was going to get was 64 GBs. Large, but nowhere near 160GBs and not large enough for a fairly sizeable proportion of the market.
However, come summer 2010, it's likely we'll have a 128 GB iPod touch priced at ~$400. 128 GBs is the tipping point for many people. Even if Toshiba comes forward with a 200 GB single-platter drive going from 160 -> 200 GBs would only impress a miniscule section of the market.
If you look at Amazon's sales, you can see the top 9 iPods are 32 GBs and less, the classic sits at number 10. With larger nanos and touches coming next year, it's hard to see the classic being able to make enough room for itself.
I remember several posts predicting the demise of the classic, but my anecdotal evidence is no more valuable than yours.
Amazon's sales numbers don't mean anything. And I never suggested the classic is the best selling iPod, only that Apple makes enough money to keep selling it.
A max capacity touch goes for $400. A classic goes for $250. This is the issue. Unless you can provide > 100 GB of storage for the price point of the current classic, there will be a classic.
There is a market for a large capacity iPod that does not cost the same as netbook.