Yay, grad to see some Mega-fan out there here.
Well, Mega Man didn't gone down hill for long.
Capcom began to push back the side scrolling element by releasing the Mega Man Zero series. Currently there are 2 Zero game and the 3rd one coming in October.
To tell the truth, the only time when I consider Mega Man went down hill is because of the disapointing X6 and X7. Classic is pretty much dead right now, the last sequel was Mega Man 8, and Mega Man & Bass isn't technically a sequel to Mega Man 8 either. It is like a side quest game featuring Mega Man and his rival Bass.
Battle Network on the other hand, is innovative but it isn't what you would expect from a Mega Man game. The idea of Battle Network is RPG combine with Pokemon elements. It gave Battle Network it own fanbase completely seperate from those other Mega Man series. I was kind of disapointed when I first play Battle Network, but then, I thought this would be first step toward a new Mega Man genre, a RPG genre. B)