It sounds like Sugar will be an installation option for the foreseeable future; most of the Sugar crew is still participating in SugarLabs, and Sugar is on all the shipped laptops so far. OLPC is just no longer paying people to develop it.
Technically, there's nothing preventing someone from porting Sugar to another netbook (some ports are, in fact, underway), so it's a weak differentiating factor for OLPC.
To me, Sugar was the essence of OLPC. The hardware was absolutely necessary and cool, but I cared about OLPC because I thought that constructionist learning could significantly improve the lives of persons living in developing countries. Sugar seems like a good way to advance educational goals, in stark contrast to the MS Office training that sometimes passes for education. So, when OLPC seemed to shift its focus from learning tools to Windows machine production and distribution, it became much less interesting to me.
I gave less to charity this year because of my personal circumstances and the broader economic condition, but that just means that my giving was more carefully targeted. I think serious differences in values between OLPC leadership and the interested public accounted for more of the g1g1 drop off this year than Negroponte realizes or is willing to admit.
Technically, there's nothing preventing someone from porting Sugar to another netbook (some ports are, in fact, underway), so it's a weak differentiating factor for OLPC.