I don't buy the whole 'average consumer can't tell the difference' argument. HDTVs are selling like hotcakes. The difference between DVD and Blu-ray is the difference between SDTV and HDTV, period. And don't get me started on upsampling. There's no substitute for resolution. Not to mention the vastly superior compression (both algorithm and bitrate).
Digital downloading will continue to be a growing market. But if you want that, you've had it for a long time now - it's called pay-per-view. If, on the other hand, you want to own the media, optical discs are still the best choice.
The holy grail for the studios is not the DRM built into Blu-ray. They make no bones about the fact that they want to be paid each time the film is watched. "Want to watch your downloaded Snow White? Disney says it's not available at the moment, in preparation for the super upgraded version coming next year." It's not as unlikely as you think.