In terms of sales I think the decline is simply that the people who bought JRPG's grew up. They're now 20 something adults with jobs, relationships, families, social lives etc to attend to and the idea of playing a 40 hour epic adventure is just not feasible. I certainly don't have time for JRPG's until my summer holiday from uni...
And whereas the JRPG 'boom' in the west got tons of teenagers to buy FFVII and then a load of other JRPG's, the teenagers now are playing Call of Duty, Halo etc.
So to improve sales I guess there are two trains of thought 1) design a game around what teenagers like now but working the JRPG stuff into it (Which I guess sort of worked for Fallout and Borderlands, albeit not JRPGs) 2) design a JRPG that the millions of people who loved the genre as teenagers can actually find the time to play and enjoy now, which I think has been shown to have some success on the handhelds with the design of JRPG's I've played on them.
Final Fantasy XIII has shown it is possible for JRPG's to still sell big (Declining sales or not) but it's a very very tough market to break big numbers when the genre leader isn't yet at 5 million (Correct me if I'm wrong lol).
