I don't know how Leica could further improve their product and still keep it a Leica, rather then turning it into a high priced point and shoot with interchangable lenses. I doubt with even the demise of the Contax G2, there is much of a market for this type of camera. Leica has signficantly upgraded most of their lenses and introduced 2 new rangefinder bodies in the last 5 years. The M7 which logically incorporates every technical improvement they can fit into the M body and the MP, which appeals to the all mechanical crowd. Based on their limited resources, I can't fault Leica for its product development and marketing efforts.
For its particular niche, i.e., a very quiet rangefinder, with fast, sharp lenses, the Leica is still the best camera in its class. Most of its user base has gone away, lured by the call of digital. Photojournalists because they needed to. Amateurs for other reasons, some good, some bad.
The weakness of the dollar has hurt them badly, causing a rapid rise in the price of cameras and lenses, in one of their biggest markets.
I think the survival of Leica depends upon their ability to produce a digital version of their "M" camera. This would significantly increase their potential market, while keeping the best aspects of the Leica.
I'm also in agreement with those who have said it's premature to count Leica out. Their are a lot of people with really deep pockets who want to keep the brand and their equipment line alive.