Network bandwidth is growing too, although probably not as fast. So this is still a realistic concern.
Network bandwidth is currently growing about 20% per year, or roughly doubling every four years.
Satoshi's original code had a 32MB block size limit, which he dropped to 1MB as part of a bunch of band-aid fixes to make denial-of-service attacks harder.
RE: density of full nodes: In my opinion, if it is affordable to run a full node (less than, say, $100 per month in server costs-- that is a trivial monthly cost for most businesses and some individuals) then we'll continue to see tens of thousands of full nodes.
Median cost of a dedicated server with lots of bandwidth, disk and CPU is under $100/month these days, which would support a block size at least ten times the current maximum.
And all of THAT is before even starting to think about possible optimizations (e.g. figure out how to mitigate the "insert malicious data" problem-- maybe Peter Todd's security bonds would be helpful-- and a shared DHT storing all valid transactions combined with bloom filters on connections could make it cheap for any one machine to be a fully validating node).
Please, don't listen to all of the FUD being thrown around about raising the block size even before there is any solid proposal for what should be done.