B&M rental stores are going the way of the dodos. There is going to be less and less a need for them. As bandwidth increases, download speeds increase, we're going to see less and less need for DVD's much less the stores that house them. Blockbuster's "drop on off" thing is only a ploy to get you into to the store to rent more/buy candy. They've got this infrastructure that they are trying to maintain. It is only a matter of time before those stores start closing as people either use online "to your door" services (Blockbuster, Netflix, or whatever).
I've friends that use Redbox (or others, I'm not sure how many there are) but they live in big towns. Here in Jacksonville (pop 750,000) I've seen exactly 0 kiosks (outside of the airport). While it works for a small population, it is hard to argue that the expense of putting kiosks into every small town in America (much less the world) is a viable business model. Sure it works in Denver, LA, SF, NY, etc. But what about Waldo, Florida? Pascagoula, Mississippi? I don't think so. By mail is going to be the last real outlet for the DVD which will fade into obscurity with streaming.
Video on demand is just the first foray into this. We'll see more. You like a movie you've streamed and want the PS3 game (probably PS4 by that time)? Stick a blank blu-ray disc into your cable box and they'll burn you a copy and charge it to your bill. Like a movie and want to buy it? They can burn a copy of that (complete with DRM intact) on the same box. This technology isn't science fiction, we saw an example of it at CEDIA (I think) last year (or it may have been CES 2006). It just hasn't been implemented. Those B&M stores are an albatross around the neck of Blockbuster. They'll kill that company or the company will discard them. Only a matter of time.