Dead? Last I heard that it was going into full use by early 2006.
http://www.philly.com/mld/inquirer/news/nation/9345317.htm?1c
There's also the news that H&K is 'teaming up' with General Dynamics on the new rifle: http://www.murdoconline.net/archives/001879.html
H&K is big enough that it doesn't need to team up with anybody. It looks to be more of an arrangement where H&K is doing some manuevering to cut their loses should this thing completely tank.
Oh and this page is interesting too:
http://www.defensereview.com/modules.php?name=News&file=article&sid=636
The XM-8 is not dead. I've handled it myself, and, ergonomically, they've improved over the M16/M4 drastically. I've never fired it, unfortunately, but I've talked to several who have, and they love it. It's a very nice weapon, and I'm looking forward to using it (just put an ACOG on it!).