I don't recall DVD players being $900 at launch.
From what I recal you could buy one for $200-300 at teh time, which made the PS2 a very attractive solution.
Also DVD had 10x's the mass appeal than a HD-Video's will have, simply because DVD worked with any TV on the market, and these only work with 10%.
I guess it's a good strategy in a way, to sell PS3's, offer blu-ray players at ridiculously high prices making the PS3 look like the best deal in town.
However, you can't ignore the moves HD-DVD might be making as well, having high-priced blu-ray players might encourage PS3 sales, but it may not be the best move for winning the format war.
Sales of blu-ray "media" would all depends what percentage of PS3 players actually own an HD-TV and buy HD movies. And I really see sales of media as the deciding factor, whoever is selling the most movies in a year or two will win.