What does shrinking a CPU process have anything to do with PC cases? They still run hot (think IB) and need proper cooling.
IB CPUs just have crappy TIM. That doesn't make them hotter, when it comes to cooling the enclosure (1 Watt = 1 Watt, though degC may vary). Indirect cooling of anything but the fastest CPUs out there has been doable for years, now, and can be done affordably, today, even without water. If you want to go all out, you could use a Scythe Ninja or TR HR-02 to cool most OCed CPUs, without even having a fan on the heatsink, and without many loud fans forcing lots of CFM through the case (well, depending on the case--in an SFF you might have to force things a bit more). It would take some care, especially with the cheaper Ninja, but it's doable. You've basically got to pull the kind of airflow control tricks that OEMs do.
An i3 would be no trouble to cool with only a quiet case fan, even in a cramped SFF case (say, 2-3x the volume of a nettop). You end up wanting or needing a regular computer case even if you have passive CPU cooling and a passive power supply, just because USB can't always do everything. If we had an external interface as cheap as USB, while being as performant as PCIe 4-8x (especially if it could be ganged across more cables), then we could start doing tiny cases, with whole-case HSFs (IE, like notebooks) and modular multi-box systems all over the place, as almost everything could be a universally changeable external peripheral.
Cooling issues we have are mostly matters of shaving pennies, and maintaining component interchangeability without loss of reliability, and less matters of real technical difficulties, except for the fastest and hottest CPUs. The Dick Tracy watch may be far off, but a Nettop or Mac Mini sized powerful computer is not commonly available more due to lack of sufficient demand, much more than that it is too hard to do.
How many people want a computer smaller than a Shuttle type, with one or no PCIe slots, limited panel IO (there's just not room!), and then having to rely mainly on USB for every non-special-function device added after the first two SATAs? OK, now of those people, how many of them are willing to
pay more than a standard ATX case scenario, to
get less system flexibility? A small percentage of Apple PC customers, and anyone buying a notebook/tablet/etc..
If I'm paying more, I want faster PCIe (more lanes), more PCIe slots, faster SATA, more SATA ports (maybe even SAS), more maximum memory, lots of options to cool cards using those expansion slots,
and lots of panel IO options (which includes being able to stuff spare expansion slot covers and drive bay covers with extra goodies, if I want).
You're right about Nemisis 1 being wrong about them going away, but I argue that cooling is a secondary, maybe even tertiary, problem, wrt to standard large cases going away. Cooling is an annoying issue because big cases in which parts can be swapped out with any other parts prevent part makers from being able to make assumptions about cooling; allow Intel and AMD to use small and cheap HSFs; and that makes it such that the 3rd-party cooler makers and case designers must make fairly generic flexible coolers and enclosures, which end up being more robust and expensive than if they were made with a specific implementation in mind (a known mobo and PSU, FI).