I don't think they will all flame out. We don't seem to be. The model is different this time. The old model was practically an adverse selection filter. That's why we've always resisted being called an "incubator." Though frankly we may as well give in to that, because few people now remember the previous generation of them.
and i think the conditions / methods have improved substantially since 10 years ago. there may be a lot of folks who fail, but there will be successes (already have been with YC, a few others). kudos to PG :)