I remember going to a friend's birthday party in middle school, the feature attraction was Jurassic Park on LaserDisc. We were all blown away by the quality.
"Niche" doesn't mean failure by any means, and it doesn't mean stay away from Blu Ray. If you love movies, if you love video quality, if you love audio quality - there's no question, get blu-ray. If it were the 80's I'd tell you to get LaserDisc.
Check out the Laserdisc comparisons to VHS:
While Blu Ray may never outsell DVD in a single year, doesn't mean it's no good. I agree that it will be a rather large niche.