It would seem like a bit of a step backwards to stay with the DVD format as a soft distro device, but with few exceptions, current game resources generally don't spill drastically over the limitations of DVD.
Would the extra storage be a big positive for developers? No question there.
Worst case scenario; DVDs could still be used to distro games, even under the hypothetical situation where ALL games require multiple discs (which has yet to happen in the PC gaming world as of now), a console could simply move to the very PC solution of full installations (insert boos here) considering that it's a given that any next gen console will have a significant internal storage solution.
Personally, I don't think there's much point in quibbling over what optical format MS should use to distro their games.
If the current generation lasts long enough, we may well move forward to a more disc-less distro system (doubtful given the cheap, convenient solution optical offers) that places emphasis on DD and possibly kiosk download solutions for those without net connectivity (currently impractical due to bandwidth restrictions) using HDD based cartridges (SSD may still be too expensive, even in the near future).
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