I'm not sure how it would necessarily royally suck, but I also don't see them doing it... not everyone has wifi or 2-4+GB mem sticks to get their games. You do realize that the main use of UMD is games? (UMD movie sales probably add up, total, to the sales of single game like GTA:LCS) UMD Movies being more or less ditched doesn't mean that UMD drive will go. The downloadable stuff will likely be smaller in size anyways (<200mb) -- Live Arcade style maybe?
UMD movies were one of those things that was likely added because it cost little for the benefit of another possible revenue stream. I'd say they would have been dumb not to try such a thing, but it seems it didn't work out (pricing strategy was terrible, target market wasn't well defined, etc).