It was a very good decision. Fitting either a HDDVD or BlueRay on the 360 would have meant a time-to-market delay (which has proven one of the critical advantadges of MS this gen) as well as a considerable mark-up on the 360 BOM (bill of materials) - AKA higher price, bigger losses. The trusty DVD-ROM on the 360 hasn't proven to be a hindrance gaming wise as the stream of quality titles has shown and the only real downsides are disc swapping and noise (the disc drive is the reason why the 360 is so loud).
I do think that considering the cost involved in building graphics assets taking 40gb of models, textures and shaders which is beyond most (if not all) developers budgets the storage available on blue-ray discs is mostly redundant besides uncompressed audio.
Current-gen game collection uploaded on the profile, full of win and good games; also most of my PC games. Lucasfilm Games/LucasArts 1982-2008 (Requiescat In Pace).
