Since next generation every game will be 100% from HDD, why drop DVD? PC games have been using DVD for years, why? Since the games comes mega compressed on disc and then you install it to the PC it works fine, very few games need 2 discs. So yeah i don't think MS will go with Blu-Ray next gen and they will certainly not go with a new format nor HD-DVD.
Neither PS4 nor the new Xbox will play games from discs, i think thats the biggest design fault with this gen. Although 360 has fixed it now, there are still some games that does not have installs on PS3. Even a slow HDD is still at least twice as fast a Blu-Ray disc and imo next gen consoles should have SSD drives.
Only drawback with DVD would be that you would not be able to play Blu-ray movies on your 360. But Blu-Ray players are common now and more people stream than watch Blu-Ray discs, so it wouldn't be a big deal.
