Hell no it hasn't. Passwords are useful when you need one or two at most. On the nets you need one for each service you use and you have to remember it. Also you have to choose your username, which you have to remember too.
This scheme puts a lot less requirements on the users, since they only have to remember their email, which is public, non-secret and (presumably) easy to remember.
I just use 1 common password for every non-critical service and I make that password different from my email password. I stick with the same username as well.
I use 1 separate password for my critical services, and store it in EverNote, and I just copy/paste it when I log-in.
It's not such a huge pain. We as tech people always tend to over-abstract solutions to problems. But it has worked for the most part for 10+ years. Ask any regular internet user and they will tell you it's not a big deal. It's only when we invent new ways of logging in like FB Connect, when users start getting angry and spoiled, asking us "Where's FB connect?!".
This scheme puts a lot less requirements on the users, since they only have to remember their email, which is public, non-secret and (presumably) easy to remember.