The japanese companies are still selling a few smaller bore two stroke dirtbikes in the U.S., but they are doing like honda and kawasaki did with the cr500s back in the late 90's. They are changing the stickers and look a bit, but they don't care to do any r&d work or improve the engine or product any. The small bore bikes probably do sell more, since they are used alot by young racers and these days it is definately cheaper to race a small bore 2 stroke than a finicky small 4 stroke that revs it's guts out as tecat-z said.
For some reason ktm has been extremely good at marketing their product, and I do agree they make nice bikes, but most think they are about the only ones selling two strokes anymore. There are plenty other good similar specced euro bikes available, including gas gas, tm, and husqvarna. Husqvarna was bought out by bmw awhile back, but still, these european companies actually still do change their two stroke models and make advances year to year in engine design and weight and all kinds of things. In fact, for a few years now, gas gas has had a adjustable ignition selector that has a sunny day setting and rainy day setting. Basically it can adjust the timing to change the power delivery and give more bottom end torque and control the hit for more traction etc. I think alot of the reason for this continued r&d is that over in europe, supermoto racing is big, and two strokes enduro bikes are street legal unlike the states. If you watch much european enduro or isde six day riding, you will see most pros are still on 2 strokes. I ride woods, and the european bikes are better for this anyway but it is sad to see the japanese companies abandon the two strokes.
73 cr250m elsinore, 85 atc70, 85 250r flattracker, 87 250es bigred, 86 tecate, 2004 gas gas de300