The decline of hi-fi audio did start long ago but it had nothing to do with surround sound. Mass-market quality audio gear started into a tailspin in the early '80s. People lost interest in fancy stereo systems after the huge boom of the late '70s and the manufacturers responded by making trash. The only companies to stick with high quality gear in the '80s were either really high-end established brands (McIntosh, Klipsch, etc) or small outfits looking to capitalize on the situation (Adcom, Polk, et al.) Previously reputable makers like Pioneer, Kenwood, even Phase Linear went to pot.
Massively high-end 5.1 and 7.1 surround systems have been available, and lots of people have them. You can get a stack of monoblock amps hooked up to a pre/pro and knock yourself out. Polk made a $10,000 5-channel surround speaker system in the early-mid '90s. But for pure music listening it all comes back to 2-channel stereo.
Quad ESLs and monsters like that aren't all the high end has to offer. Check out all the small speakers from outifts like B&W, Mission, NHT. Good stuff, expensive, and available in quite small sizes. You just don't see much of it because the middle-ground hifi consumer has largely dissapeared.
iPod docks used with high-end systems are more of an afterthought than a feature. A couple companies make iPod preamps but they're sort of a novelty item. Most people who want to use an iPod with a real stereo just do it the simple way with a adapter cable. Someone actually interested in audiophile-grade digital music will either use a music server or a PC with a good sound output card.
"Long throw neoprene surrounds" are not an audiophile feature. More cone excursion leads to more distortion. A certian flexability is required unless you're working with huge efficent speakers like Klipschorns, but it's not something to be strived for by itself.
I never said it took $7000 to make a good turntable, I said they were selling one for that. It's an indication of a level of interest in true hi-fi gear still exists. You can buy a $100,000 if you want to, they're out there.
I don't recall McInotsh making a Class A amp. Even their big iron is Class AB like most other makers, although they do use autoformer output. Some of their tube amps might have a single-ended setting but I'm not sure.