Things may in fact be better now; however, based on an experience I had approximately ten years ago, they are not substantially better, and certainly not good enough. The patient in my anecdotal evidence was only freed upon the same conditions as those in the Rosenhan experiment, and the behaviour of the staff and doctors was spot on. If anything, the patient left the institution with more problems than she entered with.
they are not substantially better
They have to be better along the "how long were they detained?" axis because for decades there were about 40% less asylum beds than there had been previously. I think it's likely that the underlying thought processes and biases- i.e. normal people looking crazy enough to diagnose if you already think they're crazy- are not significantly different, and that's what most people care about anyway. (Being able to convince a doctor that I'm sane is more important to me than whether it takes 2 days or 19!)
I haven't seen any links to this on Lesswrong yet, and I just discovered it myself. It's extremely interesting, and has a lot of implications for how the way that people perceive and think of others are largely determined by their environmental context. It's also a fairly good indict of presumably common psychiatric practices, although it's also presumably outdated by now. Maybe some of you are already familiar with it, but I thought I'd mention it and post a link for those of you who aren't.
There's probably newer research on this, but I don't have time to investigate it at the moment.
http://en.wikipedia.org/wiki/Rosenhan_experiment