I don't get as much time as I used to have to work on it, but phat_b is doing a lot with it. Check out the release notes on http://www.mediaengine.org/index.php?downloads to see whats been going on lately. But no its not dead... I use the latest version of MediaEngine every day in my car driving to work and back, testing and re-thinking. Its a VERY solid platform right now, so I'm just kind of 'enjoying it' at this time. But if you have anything you wish to suggest (and the easiest implementations are usually changes to an existing feature) feel free to let us know.
I know one thing that i'm going to change sometime is letting the user re-order the touchscreen buttons. Now that i'm using a TS and a remote, and not just a remote, i've kinda gotten annoyed with the volume being on the right. Hehe. Also I plan on someday using the on screen keyboard (OSK) somehow when browsing for artist so that you can just jump directly to say, Paul Oakenfold by just typing "PA" on the keyboard, then selecting the item from the list provided of all artists starting with PA. I get tired of touching the Page Down Button to get to the letters beyond "M" etc. This will work kinda like your address search in a GPS program.
Those are just ideas right now. But they are going to happen soon.