Of course, they (media companies and CEs) have the opportunity of forcing the market somewhat by phasing out DVD, but there's also a pretty broad expectation of what media viewing equipment and movies are supposed to cost. It's in the nature of a new format that it's supposed to increase profits, but (IMO) selling the added value proposition of HD to the masses is going to be a considerable marketing challenge. If they try to force the switchover too hard, they risk just accelerating the decline in sales by turning potential customers on to other avenues of entertainment.
I agree.
I think this is the ironic thing: Media companies think they can reboot their profits by moving customers to hi-def, and they think they can easily do this because they will position their products as a "better DVD/player". Same shiny disc, same sliding drawer right? But because it's "better" it costs more.
However, this same familiarity with the shiny disc, going to the same places to buy them, will mean that people will expect the same prices. They will know not to buy the first version or else get double-dipped with the director's cut. They will know to wait for the deals, the bargain bins, the special promotions, the lower cost tier for older movies, the online etailers who cut margins to the bone and compete viciously.
And of course if there are people who can't tell the difference between hi-def and SD, a lot of that is a problem of the industry's own making. Poor transfers and fast encoding because it's cheaper, years of selling "HD Ready" sets that do a half of 1080p with rubbish scaling, etc means that people simply may not have the equipment to see the difference, and may not be willing to pay out for what they can't see.
At the end of the day, media companies are going to have to come down in price, just as the have done on every other technology and media, but then I think that's part of the plan in order to get the last of the mass market after they've grabbed the early adopters, geeky masses, and AV enthusiasts. Of course they won't have any trouble doing that as they control all the old tech/media and will be supplying all the new stuff too.
What they will get it stricter media control, and maybe they see this as a stepping stone to their preferred world of monetizing everything, from rewinding, commercial skipping, individual plays, fair use copies, etc. Maybe they think that if they can lock down piracy (unlikely) this will magically translate to more sales (also unlikely).