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No, FFXI is alive and kicking, just the FFXI economy is whats dead. Square-Enix reported in April that across all servers total Vana'dielian population is 2,000,000 active characters. This however does not accurately count the number of "mules" that people have.
From the official website:
"Vana'dielian Population Tops Two Million! (04/22/2009)
It is our distinct pleasure to announce that during the third week of April, the total number of active characters across all worlds in FINAL FANTASY XI has exceeded the two million mark for the first time! Since the commencement of service on May 16th, 2002, Vana'diel has gone on to become a vibrant gathering place for adventurers hailing from all corners of the globe. Boasting four expansions and one add-on scenario with two more in the pipes, FINAL FANTASY XI continues to evolve into an ever richer realm of magic and adventure.
We would like to thank you, our fans, for your loyal patronage over the years, and look forward to your continued support for many more to come."
So whether or not this question is meant to troll, I have provided the answer to your question, possibly in hopes that you asked this because you're considering playing the game.