Rumours of Classification's Death Greatly Exaggerated
To me, this sounds terribly familiar, much like the constant comparison & debate between enterprise search (and DMS systems) versus the classified & browsable collection approach. I have to admit, I have no clue as to why we should compare, or debate for that matter. That's because I'm a shades-of-grey kinda guy. :-), or perhaps a bit more wholistic in my viewpoint.
When it comes to providing access to retrievable information or content, we're almost always better off making both options available. Classification without Search is great for browsing, but not so great when we are looking for a specific resource. By the same argument, Search without Classification is horrible when you only vaguely know what you're looking for... Guess what? Not all research behaviour is based upon the same level of required specificity.
The other significant oversight here, is that a classified directory structure can have meaning beyond its file contents - the collection itself can be the target of an inquiry. Whether it's the Microsoft programmers needing to segregate system OS files, or on our home computer where we keep our vacation pictures in C:\pictures\vacation05\, the loss of document groupings (...and being forced to go back and re-tag & group them into dynamic search folders...) would not be a technological evolution.
Are we going to see the death of file systems? I hope not. And if we do, I'm thinking it might be because the 'vision' of some is a little too black and white.