Blimey, don't quite know where to start with this thread.
Ok firstly, it's better to define classical music as Western Art Music. Music generally has a purpose, sacred or secular, written by a composer under patronage in order to pay the bills. Mozart was the really the first composer to break away from this, his magnificent operas are the outcome. Music genuinely written for the sake of art. This avoids the classical music/classical period confusion.
Secondly the compositional focus of Western Art Music up until the twentieth century was essentially about investigating tonality. The sonata and symphony all largely feature sonata form, which is basically an argument based on tonality, with quite a strict form. Then as the 19th century progressed the development of expressiveness and the desire to tell a story came to the fore. The writing of programme music and the development of opera. Wagner is probably the peak of this, left-motif and a desire to escape conventional tonality were his traits. The prelude to the opening of Tristan and Isolde is probably the key piece. It is in many ways keyless for chunks of time.
Schoenberg and Webern followed on from this. Investigate their early works, and the shadow of Wagner looms large, but where to go? Wagner had destroyed conventional tonality, so the next choice was to abandon it. Thus we got 12 note rows and serialism.This is all good, but along with serialism came a problem, there are only so many ways you can manipulate 12 notes without changing key. The tonal tension that music had been all about for centuries had gone. This is why their output is so small. Alban-Berg was aware of the failings and manipulated the system, he tried to include an expressive element. His operas are very challenging, but they certainly have emotional content.
Stravinsky was a key person in the 20th century, he led a change from the strings being the key instrument to the wind and brass. He was aiming for a return to expressiveness, but on a different level. The three Diaghilev ballets of 1912 were key to this. Rite of Spring is the pinnacle of this movement. Bartok created new structures, arch form, which enabled a return to tonal conflict, and many composers embraced primitivism, a desire to investigate folk music and the sounds of other cultures. Debussy years before had been besotted by the sound world of the gamelan.
Shostokovich and Prokofiev wrote music that very much reflects their time. Shostokovich's symphonies are masterpieces of the form, and are often deeply satirical, parodying that which he was forced to appreciate, or reflecting the human scale of some of the tragedies of the time. They both wrote much film music, and it's this point that is really important.There was a move back to music being expressive, of being easier to listen to. Vaughan Williams did similar. Often the smaller scale more personal works reveal the true composer. Don't forget Shostokovich was accused of 'formalism' and threatened with the gulag.
Contrast the move back away from edginess towards more beautiful and acceptable music to the work of the avant garde. Again this did it's job, but you could argue that it led 20th century music up a back alley. Henze and Stockhausen possible had a greater impact upon popular music, Cage and Ives, are really the stone in the shoe of 'classical music' It's all really interesting, but where is it going? Again once you throw out tonality where is the conflict, how do you create more extended works? How does your audience understand what is happening?
Penderecki got this. His music is fascinating, but again not an easy listen.
So, we then have the popularists. The mimimalists, the Neo-romantics, lots of really interesting stuff from Eastern Europe and Scandinavia.
My point? I guess we don't know where 'classical music' or 'western art music' is quite going. The argument really is that once Wagner wrote Tristan and Isolde, the notion of conventional tonality was destroyed, and there wasn't really anywhere further to go. Since then musicians have been searching around for a direction. I suspect our future will have lots more interesting alleyways, but less sense of a clear direction. I also imagine other centuries looked similar from the perspective of the time. From Beethoven to Schubert to Wagner is the line that springs out now. I'm not sure that would have been clear at the time.