They considered Phantasy Star IV the culmination of the series (hence, "End of the Millenium"), as they finished telling the story they started to tell in the first game.
PSO only came about because it was different and online. But "this is the end" is what Sega has said ever since PSIV was first made.
Shame, though -- I'd love to see a genuine Phantasy Star 5, with gameplay, story, and look similar to the first four. Put it in a different solar system (ala PSO), tell a different story, but keep what made the original games so great. Do a new saga.
Regardless, it won't happen.