A HDD in a next gen machine is essential in my opinion (not including the Wii)
HD graphics are very memory hungry and nobody wants to sit there waiting for high res textures to load off a slow (and sometimes noisy) DVD/BD drive, I feel that MS are really going the wrong direction in not making the HDD something developers can depend on.
As soon as the whole industry moved onto high speed optical drives, the reliability of games consoles plumited, its almost impossible to find a PS1 that doesn't have read problems, yet previous generations will work as well as the day they were bought, 15- 20 years ago. I think this is essential for a console. Being able to install big chunks af frequently accessed data to a HDD will not only vastly reduce loading times, but also vastly improve the lifetime of the laser.
In short, BC is nice to have, but only really important in the first 12 - 18 months of a machines launch, when good games for it are rare, once the AAA titles are out for the machine, most people wouldn't give a second thought to playing last generation games.
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