Actually, it's alive and well in the form of embedded images in PDFs, where it's known as JPXFilter. Most of the ebooks (scans) I've downloaded from archive.org use it. If it didn't have any huge advantage I doubt they would've chosen it over standard JPEG.
The real problem, as far as I can see, is that JPEG2000 is really slow to decode due to its complexity.
Modern implementations are decent but there's no open source implementation in that class. OpenJPEG is improving but it's much slower than Kakadu (which is what CoreImage uses) or Aware.
Heh, yes - I've been following that since you announced it. It'd be really nice if we could start getting the OSS toolchain onto a JP2 implementation with decent performance — I think jasper really soured the reputation for many people.
The PDF reader is pretty interesting, because don't modern browsers ship with PDF readers? To decode the embedded JPEG2000s, the browser has to be able to decode them right?