I agree and disagree. Camera phones are advancing quickly and you're right in that they posses enough quality for the majority of consumers, the shoot and upload to facebook type.
But where I disagree with you is that is replacing any level of DSLR sales. Camera phones are replacing the point and shoot, not DSLR. The people buying DSLRs (at any price point) are looking for more in a camera package. A camera phone is not going to fill that void.
Most of the non-pro users I know who use DSLRs use them primarily for two things. Higher MP files, and the range of focal lengths DSLRs offer.
The new Nokia 808 phone [Link] has got to have the Nikons and Canons worried. Not this particular phone, particularly... but the technology behind it that allows it to zoom digitally with (supposedly) optical zoom quality.
Moore's law predicts that we could have a sensor with twice as many pixels in a couple of years (though admittedly I don't know that photo sensors follow the same law... this does indicate what's coming down the pike).
So in a couple of years we have phone cams with high MP images, and a fairly decent zoom range. And glass made by Carl Zeiss.
Yes, the hard-core DSLRers will still insist on their feature rich cameras.... but the ones who can just barely afford a DSLR are going to be mighty tempted.... especially when their phone could have the same zoom range as their friend's DSLR with (2 lenses) and the files are big enough to print 16x20s. Heck... I'd use it. Even if I never used it as a phone, it gets tempting.