Use Envelope Distort > Make with Mesh. Create two paths as a guide, then just distort the path using this mesh by manipulating the control points of the mesh so they will snap to the guide paths. This way the text will be shrinking gradually (depending on how good job you do with aligning the anchors) and at the same time, the text remains live and editable. See attached image. At the very bottom, I've simply retyped the distorted text, since it remained editable.
You can also download the enclosed AI CS4 file.
Download:
3411_distortedtype.ai.zip