There are still tough games being made, but they're few and far between. Contra 4 is a great example. MAN that game is tough, a lot tougher than the older games were. I got it for Christmas and still haven't finished it on Normal or Hard.
I agree with the guy who said that Difficult is fun, Frustrating is not. I think that depends on the game though. If you like Contra 4, then you'll find it difficult, if you're not into COntra, then you'll just find it frustrating.
Right now, I'm playing the Splatterhouse games, and they're tough, but it's a good kind of tough. It gets annoying to have to try to beat the same boss again and again but it all has to do with tactics. The old CV games are like this too. Once you get your tactics down and know how to get thru every situation, the game is a snap.