I'm going to politely but strongly disagree with you on this one, Martin - although I'm not sure I can add much more to the debate than Tim, Benny and David have already done.
You're closer to the ground than me and if funky is dying out at a scene level then, well, that's what's happening, but to me that's a great shame because funky absolutely hasn't started to stagnate musically. (If anything I think that why some clubs and djs in East London are moving away from it is because it's mutuating too much and too quickly, they don't recognise it as house anymore so they're going back to 4x4 stuff - but y'know, their loss).
3 quick main reasons why funky has excited me so much in 2010 -
1) The vocal side of things has developed greatly - there's just so much more variety in style, mood and voices on tunes, and it fits much more neatly with the instrumental end too.
2) The MC direction too has come on leaps and bounds - they're not just hosts or 1-track novelty guys anymore, they're often the centre of attention, and what's more they've developed a style of doing this which is distinct from either grime or road rap.
3) The fuckin drums - the rhythms on funky tunes just now, especially when heard alongside each other in a set by a good dj, are just so precise, dynamic and exciting. A good funky set now reminds me of jungle in its early days around 93-94 (my favourite era), just the way these complex but forward-moving beats interlock and it's like the hypest thing ever.
I can't compare funky this year to previous years fairly because I wasn't listening as closely in previous years, and I'm not interested in comparing it to other UK sounds because each operate according to different principles. But I will say that funky has easily been my favourite kind of music through this year.