But we all know quality always yields to convenience, and 720p 6mbit downloads from my xbox 360 on a 40" display (the sweet spot for most homes) looks pretty much the same as 1080p 25mbit. On my 60" display, the 720p picture looks soft, but not soft enough for most to care.
I don't think it will be quality that drives the HD disc phenomenon for most consumers. if these players get cheap enough, people will buy them with their HD displays just like they are buying totally unnecessary HD scaling DVD players when they pick up a new TV. People tend to think that they can only get HD if they upgrade their DVD player, their cable box, etc. So these players should move once they get to the same price level as a decent player.
As far as HD downloads becoming mainstream...I'm not sure if most users have the bandwidth, technical knowhow, and desire to wait hours for HD videos to stream from the internet so I still don't see downloads being mainstream for awhile. In fact, DVDs are so widespread now that I don't think HD will ever displace it fully. I think companies will have to keep both. it will be a long time before HD gets put into people's cars and spare bedrooms.