Is manual machining going the way of the dinosaur?

In terms of jobs that is, sadly, probably true. There will still be some place for a real machinist here and there but you are asking about industry. I sold my manual mill because we moved and I didn't use it so much anymore. The people I sold it to do prototyping for a major company, all manual work. It's funny because just 5 minutes ago I turned the beginnings of a job on the lathe, also manual. But in industry it's 5 axis machining centers.

Manual machining is still around for prototype stuff. For more than a few items, CNC is the way to go. In order to run a CNC, you still need the skill set that you learn on manual machines.

Yes you are right, manual machining is only a hobbyist's thing, even for prototyping it is better to go straight with CNC machining.

There will be a continued demand for old style machining for at least the next ten years, but you are competing with lots of older shops, so a new shop needs the new fangled equipment to be profitable.