You don't need to pay to use any of the features of Live, except for multiplayer. I suggest that the free portion of Live is more attractive than Home to mainstream users. I'm a longtime MMORPG gamer, but to me there is no contest - the average customer has little interest in fooling around with a 3D avatar. Giving them a convenient way to rent their favorite TV/movies is way more mainstream.
I mean no offense by the following, but the above implies you do not realize Home will offer access to the same (and better) services than Live. B-r BD-live enabled titles on-demand is a pretty nice feature... Also I don't believe a feature that MS offers