Just a few thoughts

[doc_bean]

Okay, I don't quite follow how you go from bad FPS games to violent heroin addicted murdering 10 year olds

I guess i'l just answer your two points separately then. First, shooters, the genre has stagnated. They're the gaming equivalent of big budget hollywood action movies. By the numbers, predictable, and pretty much all the same. I haven't seen decent evolution in the genre since the original Half Life (which arguably just took elements for Duke Nukem and Quake and threw them together). The genre peaked and is now just cloning itself because some people can't get enough of them. A bit like 2D action games these days I guess. It's pretty much the same with modern RTS games, which, except for TW, or all just C&C or warcraft clones (except maybe TA, but that's nearly 10y old itself isn't it ?).
Do not expect progress in games, it's an idle dream. Many people are hailing Spore these days because it's finally a game that is trying something new, it's also pretty much the only innovative thing to have shown itself in the last 2 years or so. Many people take breaks from gaming (I did too, from 2000-2004 approximately) simply because you get tired of playing the same damn games over and over again.
Games as an art form is nothing I really believe in, maybe someday. I wouldn't easily consider a movie art either, some are artistic, but art ?

Now, about kids in the arcade. Relax dude, kids played in arcades in the 80s, there's probably more to their lives than videogames. Don't fear for the future generations just yet