Tobold writes about the second demise of Naxxramas. Structurally, nothing about the dungeon has changed or broken since its heyday a year ago, when even non-raiders like myself were pugging it. Its current disuse is purely a failure of the incentive curve.
Easier 5-man content currently gives equal or superior rewards. Because the only real penalty for failure in a MMORPG is loss of time, choosing to do something that offers sub-optimal returns for your time means that you have already failed, even if nothing else goes wrong.
The Leeching System
The dirty little secret of WoW's dungeon finder is that the system is built on trivializing content. Icecrown raiders can easily triple the DPS I was doing a year ago when I cleared all the heroics for the first time, so even a single raider can literally carry two empty slots' worth of DPS through a five man group. Tobold himself titled a post describing the system "Sometimes you just have to leech" just a week ago.
But why would overgeared players want to do this? The answer is that they didn't until Blizzard offered rewards that were absurdly out of line with the difficulty of the content. This simultaneously made success worth the raider's time and nigh-guaranteed success by ensuring that groups would be filled with at least some similarly overgeared players.
Both side of this equation are crucial - without rewards, players won't want to run content, but it doesn't matter how good the rewards are if players believe that the attempt to get them won't be successful. This was the problem that made Blizzard attempt to raise the ante for the unpopular Oculus.
(The same principle holds true for leveling dungeons - players aren't as likely to massively overgear these dungeons if they don't have heirlooms, but character power has increased significantly since 2004 due to more powerful talents, glyphs, etc. The result is that appropriately leveled characters are more powerful than launch-era dungeons were balanced for, especially if you consider that players who voluntarily opt into group content repeatedly when they could solo instead are likely more experienced and competent at running in groups.)
Implications for Cataclysm
Tobold says that the current massive rewards for use of the group system were necessary only to convince players to give the new system a try. I am less convinced. There was a non-trivial period of time (at a minimum, the entire 3.2 era) in which it was very hard to get groups for 5-man content, even though that content was likely to be easily cleared, because none of the rewards were relevant to current tier raiders.
Raiders are generally among the most active group players in WoW, and I am not convinced that the current level of demand for the dungeon system is sustainable if Blizzard fails to provide motivation for raiders to participate. The random dungeon rewards in Cataclysm will certainly start at least a tier below the top raid rewards at launch, but I would be very surprised to see them stay there beyond the expansion's first content patch (or, at most, two patches in). The bigger concern is that, as I mentioned above, there's a second side to the effort-reward equation. It does not matter how good the potential rewards are if players are not confident that they will receive them.
The real test of the automatic group finder will be seeing how it tolerates the early months of the expansion, when few players will be overgeared, making the content relatively more difficult. The dungeon finder may have expanded the demographics of players interested in group content, but many of those players now equate dungeons with quick, easy, and highly rewarding content. Blizzard will have a lot of unhappy players on their hands if the competent players that make the current ease of the dungeon system possible decide that only pre-made groups are viable due to the increased relative difficulty of the content.