A pro friend of mine told me this story.
His daughter was taking good pictures with her Kodak Instamatic.
So he gave his daughter a Hasselblad for her birthday.
A few months later his daughter came to him and said thank you, but she wanted her Instamatic back.
What he figured out was that the more sophisticated camera was getting in the way of her getting the shot. IOW, the complexity of the camera was distracting her from positioning, composing and framing the shot.
So yes, a P&S is still a viable alternative, for some people.
Even for a pro or serious amateur, there are situations where a P&S is just plain easier.
- Like family grab shots around the house. It was a royal PiA to set up my Nikon and the potato-masher flash just to shoot a couple of shots...so those shots never happened. It would have been so easy to pull out the P&S and take the shot. Unfortunately, I was so biased back then that I did not consider that as a viable alternative. This is exactly what I do now around the house, the P&S comes out for those grab shots, not the big camera.
- Traveling. I really did not have the space to carry a SLR with me on many of my work travels. The camera would have to compete against the computer, my Palm3, and work related stuff that I had to carry.
IOW, a P&S is simply a tool. A good craftsman uses the appropriate tool for the job, rather than try to make tool X do everything. So choose your tool appropriately for the task and situation.