Is the feminine instrumental in -ою literary only nowadays?
It isn't only literary, you can hear it in colloquial speech and rustic dialect, and in phraseology and idioms. Or just to express you feelings brighter.
For example: "Я горжусь тобой" (I proud of you) - is just regular phrase, means exactly what it means.
But "Я горжусь тобою!" - has a lot of feelings inside, mostly warm.