Mena and Ben are building an mCMS (microcontent management system, this is the term I like to use for CMS's that do weblogs and journals as opposed to Vignette-type products) called Movable Type/a>. It sounds like it will be similar to Greymatter (installed locally on your server, template-driven, etc.) and perhaps will provide a nice alternative for folks willing and able to install their own.
While I can see why no one else is building web-based hosted CMS's like Blogger, it makes me sad that there aren't more. There are still great advantages to having it centrally hosted (these are applications on the application-side, there are tons more on the content side, like searching, etc.): ease-of-use for newbies, everyone always gets the newest version of the app, access from anywhere with a connection (like an Internet cafe in Istanbul), and most importantly, group blogging. It's so easy to set up a group blog on application that everyone can easily access. But as anyone who's used Blogger knows, there are many disadvantages too, and for those reasons I can see why people continue to build their own systems. Content management is a very personal issue; people want it "just so."