They died when New Vegas, KOTOR2, and the like were rushed out/buggy as hell.
They were better in the past 4-5 years than they ever were.
Let me look into the release list on that...
South Park: Stick of Truth, Wasteland 2 (assisted), Showers of Goblins: NeoGAF edition, Tyranny, and Showers of Goblins 2: NeoGAF shills harder edition.
Hmmm... two of those are alright. One borderline, but worthwhile?
Nah.
Obsidian is at their best when 1) Chris is writing and 2) they're aping a style/engine that has already been used/done (KotOR, New Vegas [but to be fair there, anything would be better than Elder Scrolls with Guns and no Roleplay], Alpha Protocol).
Problem is, they're rushed, or have bugs (New Vegas is mostly not their fault though, given Beth jank/engine).