Sadly, I think so. What else could Nintendo improve on?
Better hardware, dual analog.
I mean, each new iteration of the Game Boy was basically about better hardware and/or improved controls. The 3DS certainly offers just that over the DS, and I imagine future iterations will do the same.
No, I don't think the DS line is over. The original DS showed quite a bit of longevity, and the 3DS will probably show the same amount. When the passage of time requires an improvement in DS controls and hardware, we'll get the next one.
Also, I should add that asking whether Nintendo needs to release another handheld in the future is sort of like asking whether they need to release another console. Of course they do. There will always, always be a need to improve the core power of handheld systems, just as there will always be a need to release new consoles to accommodate new possibilities for games. In terms of graphics and processing power, I imagine the 3DS is actually behind the Sony NGP--which I personally don't care about but it means there's already room for significant improvement. When they do introduce a new type of handheld (which I do believe must happen eventually), I'm sure they'll take everyone by surprise.
I mean, after the Game Boy Advance, where did we think they'd take gaming next? We just predicted better graphics, but Nintendo offered quite a bit of innovation.