My opinion on all of this:
It sucks. Period. Not just that someone feels the need to break the encryption, but that the studios must spend so much of their time and resources to put encryption into place at all.
The solution is clearly NOT better encryption, since someone will find a way to beat it, but likely will be tied to more dynamic encryption and a stronger focus on MMC and better customer care.
MMC?
Mandatory Managed Copy: The ability to make copies of the movies you buy onto other things as protected content.
Really, I imagine a future where movies are like iTunes. You hit a download page, pick a few movies you want to own (or rent) and then over the next couple of days the HD version downloads to your Vista PC. But, that's just the very start... Your new Yamaha media player is DLHD (downloadable HD content) enabled, and it automatically updates your movie list to show your new rentals or downloads you own. Up in the kids room, your new Sony flat panel is also DLHD enabled, with Ethernet straight into the back of the TV. You bring up the movie listings - password protecting any content you don't want the kids to have access to - and a few buttons later, Nemo is playing in HD on the display.
Want it in your car? Fine - a couple of clicks and a movie is sent via Blue-Tooth to your vehicle.
How about over to a friends house? Pick up your 10GB Bluetooth enabled Flash storage device and press a couple of buttons. Before you know it a copy of the movie, in full HD, has been put on the device, but it can only play for a few days before it expires.
Disaster strikes! Your hard drive fails and all your movies are lost!
Wait, your online purchases are maintained in your customer account. After a few minutes confirming all your details, 100% of your movies are available for you to download over the next few days/weeks onto your new hard drive.
Would you buy into all of that? Does it all make sense? I mean, I clearly am just making this crap up off the top of my head, but I see that as becoming a next generation reality where video media is as open to whole house usage as our music currently is. Even moreso though with further integration with our networks and wi-fi, yet with a maintained encryption that is updated to protect the studios from those teenagers (or others) who just want to rip them off.
No more "out of stock" movies.
No more "cost of production" for DVD discs.
No running to the store to return a late rental.
Faster turnaround time then Netflix could dream of - at a lower cost!
No scratched discs!
HD that can be customized at that start for your display and may have a cost associated with that customization (1080p costs more than 720p, but your displays are 720p so that download matches better).
Right now, it's about as good as it gets, and it isn't that good. They seem to have focussed so much on the DRM, that they forgot that MMC was supposed to be a part of this as well.