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Saying UMD is a "dead format" is like saying the proprietary Nintendo Wii DVD-esque disc is dead, because no one buys movies on it.

UMD is awesome for games. I don't see any reason why Sony would drop it. IF they enhanced it with cheap Blu-Ray tech down the road, and it could store a whole 480i DVD's worth of info, it might even make a comeback as a movie format, assuming Sony made the royalty prices attractive.

I think a disc format, like UMD, would almost be a prereq for any handheld fancier than the PSP.  I sincerely doubt Sony will "drop it" and move to carts.