"Is anyone still developing software anymore, particularly in smaller-scale, “embedded” systems running on platform-specific operating systems?"
Yes, massive, massive amounts of it in fact. Embedded is not all pay terminals and user interface displays, it's everywhere, hidden away in the background, performing all sorts of obscure but essential work (much like the engineers doing it).
A lot of the commercial RTOS offerings aimed at deep embedded have become bloated out of all proportion as they push for Linux like functionality, this is simply too much when reliability and performance are your primary concerns (rebooting flight control systems when they throw a wobbly is not ideal). There's also the issue of certification, which is hard enough without adding in masses of third party vendor code.
That leaves you home brew solutions (multitasked or not) or something light and tight, personally I go with the best kept embedded secret out there www.state-machine.com, which nails the middle ground the commercial vendors seem to be drifting away from.
On a slightly different note, agree about the limited number of engineers competent in this field, it's very hard to find good people. It amazes me when I'm interviewing guys who seem able to develop pretty sophisticated .NET apps, yet have absolutely no comprehension of how a CPU works.