The concentration on picture-quality seems a bit daft, if you ask me. Keep in mind that there is more than video--and audio--coming up in this next generation.
IMHO, the interactive layer of HD-generation disks may be the real deciding factor in how they get picked up. I'm not expecting much from this first wave of games, but depending on how clever publishers are going to be and what they can offer consumers through it, there may be much more than "I have an HDTV so I need HD movies" involved.
We're entering a real push from the PC end as well on home networking, with heavy emphasis on the living room/entertainment center first. (As makes the most sense, since that's where the consumers' eyes, ears, and most expensive electronics will be. Portables [cell phones especially] will be leaned on as well, of course.) "Mere" DVD's may be seen as dead-end tech sooner rather than later not because of them looking poor in comparison, but simply because of what they
don't do. I can't imagine going back to VHS--not for movie-watching nor for television recording--not because of picture quality (TiVo on low quality isn't hot, and many TV's won't let you take supreme advantage of DVD's anyway) but because of the wholesale loss of convenience. Chapter-skipping, instant response, rock-solid pausing, stacking program after program in the same place, offering insanely-fast searching... Who the hell cares about picture quality? Broadband and 56k both deliver the same
quality .jpg's on the browser page...
IMHO, the adoption of HD-DVD and Blu-Ray will not be as much what they look like as they will be about what they are
made to do over the next few years. The computer age is all about "info-tainment" now as well as "entertainment," and the moment consumers can hit a button and order a good-looking movie they just saw on preview (direct from Amazon, price-check it on Froogle, add it to their Netflix queue...), hit a button to be told every major actor in a scene and pull down their bios, get important email notices while they're in the middle of a film, browse a list of "movie friends" to see what they've all recently been watching to find inspiration...
DVD's won't be standing still during this transition either, but I have a feeling I know where the emphasis will lie. DVD's in general will be enhanced by the media center computing effort, but the HD generation players are aimed at a different future for
themselves. It all depends on when that starts being realized through the publishers, and just how hard and smart they're marketed for public awareness.