The decline is not in the fact that a jack-of-all-trades characters are viable. I would go as far as saying that a game in which a jack-of-all-trades character is viable is a better game because it's balanced better for all choices that the player may make, thus creating a more credible illusion of freedom.
Except it's not. If you design a combat encounter for someone with 50% combat and 50% diplomacy, then it's going to be pitifully easy for a pure combat player. In order to balance three nodes - 100% combat, 100% diplomacy, and a 50/50 character, it's going to be very difficult, since if you want challenging combat for the combat character, you'll have to either give them a diplomacy penalty or give the 50/50 character a bonus each time, and a separate path for the non diplomacy character. Alternatively, you could create a separate path for all three - more optimal, but much more work.
And that's with only two points that could be put into just two skills. If you want to allow the player to be able to other skills like sneaking and lockpicking, and if you want to include more points (1 - 10 in each skill), it becomes much more of a mess.
Fallout dealt with this by letting you do everything well. My characters always had one or two maxed combat proficiencies (enough for 95% eye shots at maximum range), maxed speech skills, and the maxed amount of science and repair I needed. I did just about everything in one play through. AoD seemed to go the route of forcing the player to specialize, and letting the Jack of All trades route be a more difficult path for people that know the game. Geneforge did it by making several areas where there was a combat path and a non-combat path (though you still would have some combat skills), and a number of areas you'd have to run through if you wanted a non-combat game (not sure if this would be possible, it seems like it'd involve a lot of running).