The chipping away at state sovereignty happened because states kept using that sovereignty to oppress black people. The post-Civil War amendments were a huge smack down, because they set the stage for binding the states to the Bill of Rights, which had previously only applied to the federal government. That had a big impact not because states couldn't say violate the freedom of speech anymore. States already had similar clauses in their own Constitutions. No, the real significance of that was it elevated the federal courts to a position of supervising state compliance with federal rights.

From there, Supreme Court precedent told the states they couldn't keep blacks from voting, couldn't segregate them, couldn't ban interracial marriage, etc. Every time the states tried to oppress this or that group, they put their sovereignty on the line and the Supreme Court took some of it away. Consider when the governor of Alabama, George Wallace, took a stand against federal court ordered desegregation of the University of Alabama. President LBJ sent federal troops down to Alabama to enforce integration. From a state autonomy standpoint, it was a huge blow, as the federal government asserted its supremacy. The governor of Alabama was forced to step aside on the property of a state university as National Guardsmen escorted black students inside against his will and that of Alabama voters: http://partners.nytimes.com/library/national/race/061263race.... This continued through the 1960's and 1970's. The state courts were put in their place when the federal courts started aggressively supervising their procedures, to deal with their tendency to fail to give fair trials to black defendants.

Federalism is dead because the states pissed away all of their political capital trying to oppress people.