I have served twice in Iraq and once in Afghanistan. Here's my take: What happened is two major wars and a Global War on Terror. Service members in tactical units have been deployed over and over in the past 10 years. Practicality becomes more necessary than ceremony and pomp. Our ACU uniforms, while not as sharp as starched shirts and trousers, are utilitarian. Desert boots don't require polishing and are actually usable in the terrain we deploy to. Many soldiers "grow up" in the military as lower enlisted in a deployed environment, where soldiers live together much closer, even with their NCOs and officers. Salutes and "Yes Sir!"s are replaced by interaction on a more personal level. I have no idea what things were like in the 60's and 70's, that's way before my time. This is just my experience in today's Army.
Military bearing is certainly not as sharp as it used to be, and I agree our uniforms don't look very good. But the military has had more important things on it's mind the past decade. As the wars wind down, Commanders and CSMs will start bringing the garrison side of military life back in full force.
All that said, I was in the 82nd for a few years, and I can tell you Drill and Ceremony is alive and well. More than once I stood in formation for hours in the baking Carolina sun, helping to keep that part of military life alive.