Classical Arabic or "fusha" is nowadays spoken more then ever if you ask me.
It is however not the "living language" (loghat al-hay) that Arabs speak daily, on the street, with their/our children etc. This is evident because Classical Arabic is the language of the Quran about 1400 years ago. And just as every spoken language changes overtime spoken Arabic did as well. Do bear in mind that the spoken dialect differ from region to region in the Arabic world or country to country because of geographical locations, history and language spoken before Arabic appeared. So in their spoken Arabic north African still use some berber words, french of even Spanish in Morocco. Lebanese also use some French words (colonnee) and even Assyrian ones I have been told by Libanese friends. And of course the verious Arabic dialects differ from each other and some are closer to Classical Arabic then others. Moroccans are known for having a dialect that is pretty hard to understand for Egyptians, Libanese or Iraqi's (non-moroccans basically). Whereas Egyptian dialect is well-known because of the fact that all the films and soaps etc are made there and the rest of the Arab world hear their dialect quite frequently and get used to it.
However, with the appearance of satellite TV, internet and more education in the Arab world Classical Arabic is more widespread because it is used by official media and the language we write and/or read books in.
So on news channels such as Al Jazeera, Al Arabiyya etc they speak classical Arabic as do the people they invite to discuss political issues in their programms. And most of these people are well educated so do not have any problem to speak Classical Arabic. However, if you did not study you will have a hard time to keep up speaking Classical Arabic because it is a very detailed language and not spoken in every day life. I would say that if you finished your secondary school as an Arab you understand all Classical Arabic perfectly and can speak it to a certain extent if you just practice it enough. If not you have to get used to it if your forced to speak it after some time just like someone who speaks French needs to get used to speaking it if he did not speak it for the last 10 years.