If the first HD DVD players are going to be $400 - $500, I highly doubt the Blu-ray players will be $1800. Possibly the flagship Denons and Elites, but not entry level. They'll lose the war before it even starts.
If a PS3 will play Blu-ray movies, and you can pick them up for $399, then I'm sure you'll see players hoovering around that price soon after the release. People won't rent these 1080i movies if they can't afford 1080i players.
I'm anxious to see what Netflix and Blockbuster do as far as rentals go. You'll have three formats to rent movies, and that will definitely affect how blockbuster pushes different formats. My guess is one will win out over the other sooner than you think. My vote is for Blu-ray, and I'll probably pick up a player by the end of the year if they drop down to the $300 range, and the rentals are $5.99 or less.
If they make the mistake of pricing these rentals and players much higher, people may choose to go pay per view in HD, as cable and satellite boxes have the technology right now to take a big bite out of the market. Speculation of course.