Yep, cramming more megapixels onto the same size sensor isn't the right way to go, IMHO of course.
It is not that easy. Sensor technology advances and therefore it is possible that newer sensors are better even with more pixels. For example, there is no doubt that the new 16MP sensor is better at high ISO than the old 12MP. However, if sensor technology is the same, a sensor with less pixels will be less noisy at 100%. But don't forget that we are looking at different magnifications, because the whole image of a 12Mp sensor at 100% is much smaller than a image of an 16MP sensor at 100%. Thus looking at 100% is the wrong way to compare two images of different sensors. If all other things are equal, more pixels will contain more information and will be better.