Took a 3 day break from the thread, came back, caught up, and... what in the world? First of all, I want to mention that there was a one year grace period after the end of the format war, but now all militia members from either side are to have turned in their weapons.
This thread isn't about the merits of various optical technologies against one another, just simply whether it makes sense for the [720] to include a BD drive or whether an alternative based on HD DVD... and we'll expand that to any cost-effective alternative... makes sense.
I want to go back to this post by Brimstone, as I wanted to make a point to Microsoft's would-be goals and the context of the future "digital living room."
The main incentive for Microsoft to include a Blu-Ray player with full BD playback is to intice the Hardcore PS3 owners to buy a XB720.
The Hardcore PS3 owner is going to own some BD movies, so if the XB720 can play them it just makes the platform more appealing to that segment. Microsoft wants the Hardcore gamer.
Now, I don't think MS' goals are to lure hardcore PS3 owners in the least, and nor do I believe that MS is content with hardcore gamers being the extent of their domain. Ignoring the BD infrastructure aspect entirely at this point, I think part of it will just simply be if BD is considered 'popular' or not by that time. Statements have been made that there won't be a unified HD VOD service by that time - true, but not having an ordained successor is not the same as the assurance of BD's ascendancy. Right now it's got ~10% of the disc market, which IMO is pretty good, but how it trends three years out will be what matters in that regard.
Ultimately the point is that both MS and Sony
do want these consoles and their successors to serve in a 'portal to media' capacity - forget the Wii and its sales numbers, as it's not in that arena - and in a future where any and every STB and assorted player-of-whatever is going to be able to start granting access to simple gameplay and connectivity, if BD players themselves became a popular means of connected media access and Wii-level gaming, I mean it certainly behooves MS to equal those checkboxes and more.
So I see it as does it just make sense to include BD because it'll be cheap anyway; if there are viable alternatives, or alternatives considered for anti-piracy reasons, well there's another aspect that might cause MS to go another route anyway. Regardless of the above, if BD is considered an integral part of the unified 'media' experience in the year 2012, then I think MS will include it just because it doesn't need to be missing any features it'd be simple enough to include as not. Granted they might support through optical or otherwise a contender to BD's niche that might actually actively take them away from BD, but that's not worth guessing at.
Point being, quad-level BDs, the maturity of multi-layer DVDs... all this other stuff... it's not what MS cares about. These are things that will only factor in depending on the other criteria MS needs to consider and where they opt to position themselves. The original question of the thread was simply would HD DVD make sense. And yes it makes sense enough, scenario dependent.