Yeah, you're probably right re: the Windies. Whatever was happening with those Windies players coming through they stopped doing it and the quality of players coming through obviously fell. I've heard other reasons put up for the Windies decline, a more outlandish one being that they started screening the NBA live into the Caribbean and all the kids wanted to be Michael Jordan rather than Viv Richards. I think your reason is probably closer to the truth.
There's something not right in Australian cricket right now - we won't fall as far as the Windies have, but it will be some years before we are a force again at the top echelons of test cricket, and competing to be the best test XI in the world.
The thing that worries me from an Aussie perspective is where the spine has gone in the aussies. Apart from the thrashings England have dealt out, in 2010....
Against Pakistan in England...first test 171/2 to 253ao. Second test 88ao.
Away to India...first test second innings 87/1 to 192ao. Second test second innings 58/0 to 65/3 and then 126/3 to 223 all out
Away to NZ...second test first innings 129/2 to 231ao.
That's 5 collapses in 12 innings. Granted not all of those resulted in defeats but you're up against it when the opposition bowlers not only think, but know, that one wicket will bring 2 or 3 in quick succession. There is no shortage of quality in that batting line but it's just been plagued recently by inconsistency and a tendency to crumble under pressure.