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DRM is a must if there are going to be rental services for digital content.


That is true. But we weren't talking about rentals were we? We did talk about restrictions to freely copy movies TO the 360. Not to copy rented movies from it.
Rental is the only place where DRM has a place. And even here : How many movies do you rent multiple times from Blockbusters? Not many I would think, so why not make everything a sale but lower-priced than DVDs? After all you do not have to pay retail, disc manufacturing, packaging. In the long run video DRM will fail as miserably as Music DRM. I think many people would pay quite a bit more than they currently pay for media for simply having access to the whole library of movies and music ever created. (A bit like bittorrent but legal and with a better selection and a iTunes Store like interface)