I wouldn't go that far. Most distros have switched to GNOME on Wayland by default, and Fedora 34's KDE spin has switched to Wayland too. Sway is niche but not insignificant anymore (I use Sway).

X11 is definitely not dead yet, though. FLTK programs, Wine, and some game engines still require X11.

Same. I'm slowly switching from GNOME to Sway, but I'm not going 100% until Chromium's Wayland support is better, since I spend 98% of my time in Chromium or VS Code. The good news is they are actively working on it since ChromeOS will (does?) use Wayland so they can split the Chromium browser from the Chromium that runs the OS shell.

If last time you tried using Wayland was Sway, maybe this is the issue you were running into: https://github.com/swaywm/wlroots/issues/2889

TL;DR: Drag and drop involving chromium or electron windows has been buggy. wlroots/sway has not implemented _NET_CLIENT_LIST_STACKING, and both the fallback code inside Chrome/Chromium and the way sway has been stacking Xwayland windows have been buggy. A patch has been submitted to Chromium to fix the faulty fallback, the sway bug will be fixed, and wlroots will also support _NET_CLIENT_LIST_STACKING, so by the time the next sway release comes out everything should be ironed out.

Maintenance on the xorg server code base has all but ground to a halt. The next release is nowhere to be seen. Eventually Red Hat just said fuck this shit and started rolling xwayland-only releases.