There was never any question that Brian could talk. There are several episodes that revolve entirely around him, and his interactions with other people. These interactions occur through talking. Like when he has to go to rehab, or gets arrested and put on trial. In terms of the scope of his character I think of him more as a human that happens to look like a dog and occasionally acts like one too, rather than a talking dog.

During the original run it started out that the only character that could understand Stewie was Brian, and then as it progressed you got the impression that the other characters were actually responding to Stewie. But they never were responding to the actual words coming out of his mouth, just the actions he made and the context in which he made them. The only other character that actually comprehends what Stewie says is Brian; not even other babies.

I've yet to watch the new episode so I dunno if it's changed, but we shall see.