The "diffraction limit", i.e. the f-number at which diffraction begins to reduce image sharpness does indeed decrease as pixel density increases (for a fixed size sensor).

However is not true that resolving power cannot increase past the diffraction limit, just that it will increase by ever smaller amounts, in a situation knowns as diminishing returns.

When shooting at an f-stop that is so far past the limit that the increases are negligible then there is no benefit to increasing resolution (for that f-stop), all else being equal. However in the real world things are never equal so there may be advantages to higher pixel counts when it comes to reducing noise.

---

Many have claimed diffraction will put an end to the "megapixel race". It will, of course, but not as quickly as some realize. We are still seeing real benefits with APS-C sensors containing 24 megapixels. That equates to a full frame sensor with 54MP, far more than the 'diffraction limited' D800 with 36MP. I predict pixel counts to rise past this level, topping out when diffraction is having a noticeable effect at f/5.6, which is probably 100-200MP for a full frame sensor.

Diffraction is still the ultimate limit to detail however, there's really no escape. Moving to medium or large format wont let you bypass the limit - it's tempting to think so given the larger pixels of the equivalent resolution sensor. But with a larger sensor narrower apertures are required to get the same depth of field, and faster lenses are rarer for large formats.

Using a wider aperture is the only solution, but that too runs into problems as it reduces depth of field, causing large amounts of the image to be out of focus which very quickly limits detail.

The only option then is to reduce your focal length. This results in a smaller entrance pupil for the same f-stop, meaning your depth of field is larger for the same diffraction limit. However chasing this parameter eventually leads you into difficulties again, as focal lengths get shorter, maximum apertures start getting smaller again and detail is limited by standard optical aberrations, unless some advance is made in lens design and materials.

Panoramic multi exposure images will therefore be the future of high resolution. By bracketing focus they can escape the depth of field limits, and by using many images taken from longer focal lengths they can escape a lot of the aberrations present in wide angle lenses.