In terms of technology, I suppose it does stagnate. Space travel and hyperspace seems to have been around for a very long time in the Star Wars universe, so most technological progress seems to have been merely improving on ancient technology rather than innovating. The major advancement in Star Wars would probably be navigation, since discovering hyperspace routes is done by hit or miss. The known galaxy is much larger during the era of the Empire than the era of KOTOR.
I don't think lightsabers should represent the growth of technology in the Star Wars universe though. The prequels screwed everything up. In fact, I like to completely disregard them and continue to look at the Star Wars universe from before they were released. Lightsabers have always been known to be an ancient weapon, and it makes sense that they would be in abundance during the period of KOTOR. Throughout the three original movies though, we only see three different lightsabers. Yoda and Emperor Palpatine never even show or have theirs, which in a way proves that they are no longer important.
But in the prequels, which only take place about 30-40 years before the events of "A New Hope", there are thousands of lightsabers in use. Many speculate that George Lucas did that in attempt to make a purely visual show and ended up in dumbing down the meaning of a lightsaber, which in the dying days of the Republic were supposed to be more of a status item than a weapon. The whole visual style of the prequels imply that the days of the Old Republic were more advanced than the days of the Empire, but I think that's a result of George Lucas and the new technologies of film-making.
The technology and style of KOTOR would have been more fitting for the prequels, it reflects the "civilized age" that Obi-Wan refers to without looking too advanced in comparison to the era of the Galactic Civil War. KOTOR should look even "older", but it did a good job of portraying how the universe would be during that time period.