I was traditionally in favor of keeping the full language list visible, but.... it's just too damn big in many cases and is hard to search through on any device. On touch devices it's difficult to pick a correct item from the list as all the links are adjacent (though if you zoom it's ok).
Definitely we need something improved, and if we're going to improve it we need to do it for the default or we're failing to serve 99% of our readers...
I'm not sure about the current demo; one thing that bugs me is that there's a very small tap/click target for getting the full language list call-out. Clicking on "Language" just hides/shows the short list, it doesn't do anything. Clicking the "settings" gear icon next to "Languages" brings up a call-out with language-related settings.... none of which help you get to another language version of the wiki.
On the mobile site we've collapsed the whole thing to an "Other languages" section or button (depending on if you're in beta mode) at the bottom of the article, and this seems to have gotten good usability responses from mobile users.