"My Dad has a system like that", she said....

I bought my oldest grandson an old Harman Kardon receiver and a set of speakers to keep the dream alive. Source is an ipod through the aux input.
His mom yells at him to turn it down on occasion. Payback.

Something the younger iPod generation would appreciate would be a dock like the Fatman iTube that was available a few years back. Add quality desktop passive speakers and they, themselves, can experience the magic of tubes. With an iPod!!

"Is the whole idea of having a stereo system - a rack with components plus separate speakers, maybe a subwoofer - skipping the younger generation?"

No, I don't think so. I got into this hobby in college and am now 29, and I have some audiophile peers. There will always be young people who have a deep love of listening to music, and for that reason there will always be those who venture down this path to make their music-listening experience better.

The newer gadgets don't necessarily detract from hi-fi. On the contrary they can offer new channels of getting into hi-fi. For me it began with HT and "surround sound", then SACD. For others I know, it was splurging on $80 Grados for their iPods. From there it's a slippery slope.