Isn't he on contract for Avengers 2? Or is that wishful thinking on my part. Personally I think Downey needs a slightly better sendoff, it felt like they were thinking "well, he MIGHT be back to Iron Man 4, we HOPE he will, so we won't give the character the right amount of closure to keep the door open." Even if he isn't a main character like in Avengers, it would be appropriate I think if he came back for one last retirement tour.
Reflecting on the film a bit, I really do feel that the story was weak. The problem with the Iron Man sequels is that it does kind of feel like it's the same thing over again, even though each film (Avengers included) is fairly different. It still another Iron Man appearance. The films are based on character more than plot, and this one had a couple really great twists but I was never really engaged that much. Still a good film, worth seeing, but I still have this feeling that if I never saw it again or they never made a fourth entry I wouldn't really care. I would care if Downey was absent from Avengers 2 though. I feel like he works better in that ensemble than he does on his own, although I guess you could make that argument for all of the characters. Maybe it was a lack of tension that I was feeling. They clearly did try to bring Tony Stark down to rock bottom, I guess the problem is that everyone knows that he'll end the film driving away into the sunset in a sports car.