Rumors of the mini's demise have been greatly exaggerated. But, I think they are true.
It's primary purpose for existence when introduced was to encourage switchers, by not forcing them to buy new peripherals (BYOKM). That the mini took on a life of it's own was perhaps an unintended result.
The only reason to have it around is to have an inexpensive computer coupled with a larger monitor. But with the mini at $600 and a 20" monitor at $600 you are likely to go with an iMac and get better graphics and a larger hard drive. (I understand you can buy a less expensive monitor from another vendor, but that doesn't help Apple).
I am using a mini right now, because I didn't like the glossy screen of the iMac and had an Apple cinema display already. The mini is also useful as a inexpensive server or development machine, but these uses are most likely not producing the numbers Apple wants to see.
Apple makes their money by keeping a simplified product line and keeping it around for a long time. That's how they get 30% of the money with only 10% of the computers. This also allows them to spend a lot of engineering time to come up with stuff like the Unibody enclosure. iMacs and MacBooks are the money makers for Apple and they have publicly stated again and again their lack of interest in the low margin budget PC. Better to let Dell and HP fight over the scraps.
As the economy tanks, it would seem like the appropriate response for Apple to enter this market, but that just hasn't been Apple's approach. Remember the last downturn and Apple's response? They said they would innovate through it by investing in research. That strategy worked brilliantly and set them up for the last four years of rapid growth. Their strategy is always counterintuitive; I expect them to drop the mini and eventually the white MacBook and have basically three Mac products: iMac, MacBook Pro (MacBook is a MacBook Pro now), and the PowerMac.
You may not like it, but that's what my crystal ball says.