Since the transition to 3d, there have been some great 2d console games. But they're not very common.

Viewtiful Joe did quite well and Little Big Planet looks like it will as well, but most series made the 3d jump, leaving only handhelds to carry on in 2 dimensions.  The sidescroller seems to be a type of game which dev's just don't know how to handle on a console at all.

So I'm wondering, what is the future of 2d games on home consoles? Are they destined for obscurity? Is there a niche market on the way? or  will the odd stumbling dance of not quite knowing how to handle it continue?

Downloadables-PSN, Live Arcade, Wiiware.

XIII was 2-D wasnt it... if so... multiplayer kicked ass on that game.

I think there still will be games in 2D; maybe not that many, though.

One game that I can't wait for just so happens to be in 2D: Street Fighter 4.

They are like classics, in the sense of the style, I think they are niche now... which is sad because that was the main feature of gaming in the last century...

Don't forget about JRPGs, especially strategy JRPGs. Games like Disgaea prove it can still work. These niche RPGs can't really make the jump to 3D (and especially HD 3D) since they target too small an audience to justify the budget, yet aren't especially suited for handhelds (though we're seeing quite a few on DS/PSP anyway). I'd expect companies like NIS and Atlus to be making 2D console games for a long time to come. Either that or they'll just go belly up, but I think there's still enough of a market for it.

It will likely remain for WiiWare, XBOX Live Arcade, PSN and handhe;ds. Although there may be the occasional 2D console game.

 Very true. But I wonder, is that just because of space concerns? Or is it also a case of worth?

I'm sure that dev's could make lots of 2d games that actually take up a fair bit of disk space. But it seems like the move of 2d games to that sort of area is more based on worth. We find 2d games on handhelds (And even then not on the PSP) and downloads because they don't warrant full retail purchases on consoles. 

Why is that? Are they considered less of a game? 

On consoles it seems that they’re relegated to playing a niche role intended for veteran gamers with a few updated sequels/versions/compilations, etc. with the occasional unique game.

2d games will be on the downloadable services