Yes, the original ROW has been permanently blocked between MP 2.4 and MP 2.8.
The TMNY does have an outline of a plan for a trolley connection to the CMRR, if they decide to have an uptown trolley network someday. This would eventually connect with the new multi-mode transit hub to be located near Washington Avenue on the CMRR at about MP 4.37, and allow access to Kingston Plaza at MP 4. The outline of the plan is in their long-term plan (link below) and the relevant excerpt is listed below. Keep in mind that this is a very long ways off.
EH
http://tmny.org/MasterPlan.html
Expansion ideas in Midtown Kingston
Build trolley loop near the site of the former East Chester St. car barn.
Extend line along original U&D alignment to behind City Hall. This requires coordination with the planned parking structure construction. The City Hall trolley stop would be in the lower level of the structure.
Reopen trolley tunnel under CSX line: Shunt from where U&D alignment approaches Grand Street to south of the NYDEP building (formerly Micronetics) to connect to original subway alignment at Canfield Lane (the end of Dederick Street). New road access will also need to be provided for access to the buildings on Canfield Lane.
[Are tracks down Broadway desired?] Potential traffic congestion is a concern to maintain a regular trolley schedule. Following the original U&D and trolley tunnel alignments as much as possible avoids Broadway congestion. The trolley tunnel will not be inexpensive to build, but overall cost should not be significantly different from the cost of installing track in Broadway under the CSX and Railroad Avenue bridges. The U&D alignment also has the benefit of avoiding extremely sharp curves, at least until Grand St. Trolley cars can accommodate a radius as small as 35’, whereas the subway and railroad equipment in the museum collection, being longer and heavier, must have wider turns with a 90’ [?] minimum radius.
Once the trolley line is extended to the west side of the CSX tracks, it has been suggested that the line be continued to Kingston Plaza. The former U&D line is still intact in this stretch and is currently leased to the Catskill Mountain Railroad (CMRR).
[Research needed on Federal Railway Administration (FRA) ramifications of CMRR connection, both with and without a CMRR connection to CSX.]