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I also voted for DLC, in 3/4 years 1 TB HDD will be very cheap, it will be worth to place it inside a console as it saves space, licences, distribution costs, i belive it even can save taxes !

I also believe that using a right DRM metod as iTunes, it can help to fight the piracy and in 3/4 years even me, that live in Colombia, can expect a 4000K or 8000K to download those 25GB games.

How many games do a usual person buys in a console-generation ? I dont think it is more than 30 and that´s enought for 1 TB, also it would be nice an iPod-like distribution where u can transfer all your games from one account to another no matter switching hardware