I just don't see it. The decline of CRPGs occured a few years after Garriott's comments - hell, I wasn't even aware he uttered them. Also, Ultima was far from dominant; in the same period, Might & Magic, Wizardry and one-off titles like Lands of Lore and Betrayal at Krondor also enjoyed popularity. The fall in the number of titles coincided with
a) Doom, which everyone tried to (unsuccessfully) emulate in an effort to cash in on a runaway success (forcing studios to make a game 3d and "rendered" even if it didn't benefit from it), and
b) advances in multimedia technology, which prompted developers to finally realise their dreams about interactive movies (a concept which, unfortunately, sucks).

Second, your appraisal of Ultima Underworld is entirely off base. It was not the degeneration of Ultima, but rather an entirely new approach to doing CRPGs - just like Wizardry I. represented a different way of doing things to Ultima I. It gave rise to a small but enduring game form, mostly associated with Looking Glass Studios: System Shock, Thief, Deus Ex and Bioshock. These are often classified as shooters, but the way people approach them is often very RPG-like - just not the "stats on screen" variety.

A party starts in my pants whenever a thread strays to mentioning Deus Ex. Seriously, that game is amazing. I'll wing a pumpkin off a motherfucker's head should they disagree. Then I'll cry... like a schoolgirl. Ever seen a grown streetpunk cry? No? Good, you don't want to.

:raise:

-=Grim=-