I think there are tons of differences between the PS2 with DVD and the PS3 with Blu-Ray. In 2000:

• DVD had been around for 3 years and was already becoming a well established standard; this meant that there was a lot of comercial demand for DVD and a lot of retail (and rental) infastructure in place to push the format to the next level; at the time most movies were released to DVD and the back-library of DVD movies was quite huge. Also, the quantity of DVD players being produced also made adding DVD support to a console reasonably inexpensive (in particular for a company like Sony)
• Consumers already had the necessary equipment to see the difference between VHS and DVD; all it took was a TV that had RCA inputs (any TV made since the mid 80s) and sterio support and the improvement over VHS was obvious.
• By 2000 most games were spanning multiple CDs in PC and Console games.

Blu-Ray isn't a bad technology, and I'm certain that people who bought the PS3 are glad that it is there but it certainly is the wrong technology for the time.

Yes and no... I do think that BR has a good chance to beat HD-DVD for the title of next gen movie format, just because of PS3, that might mean more money for Sony than the game division. However I do feel that DVD will be the main system for at least a couple of years, if not even more. The transaction from DVD to VHS didn't take just one year. In the meanwhile Microsoft is doing everything possible to prolong the format war, which in turn means that many people remebering the VHS vs betamax will wait. When the smoke is settled people will start buying in to next gen if the movie price is right, backward compatibility is there and so on. The problem I see is that this is mayby 2-3 years away from now when the start of the mass market acceptance is there. I do think that some of Sonys allies in BR players will be able to pruduce and sell one cheaper than PS3. Reason? PS3 is a great machin with a lot of power, controlls ect that an ordinary BR player doesn't need. This means that Sony might need to sell with a loss too beat the ordinary players on the market, something I doubt that they want to do. Another problem I see is live streaming over the internet with higher quality than youtube, could mean that the next gen format isn't as large as DVD is. I honestly doesn't think that problem is very large but anyway, worth thinking on.

I agree, we won't see what's happening with BR and HDDVD for another 2-3 years TBH.

The good thing is that the PS3 potentially is strong enough to last at least 7 years and could be around as an incentive for buyers (as long as BR becomes the no.1 choice). 

The cable companies are going to make a big push to get a piece of the HD market. When DVDs were released, they really didn't have the technology in place to make On Demand a reality. But the combination of low cost DVRs and better routing makes On Demand far more desirable for consumers. In addition, with On Demand a consumer doesn't have to make an investment in hardware.

 Will On Demand replace solid media? No way.

 Can it capture a significant portion of the the market? Definitely.

In ways the same thing could have been said about the N64, XBox and Gamecube because they all had more power than the systems they were in direct competition to ...

The reality is that sales and not hardware determines which systems have the staying power

Blue Ray is something that could pay of for the PS3 2 or 3 years down the road. It's definetly a gamble though. If either HD-DVD starts to turn to corner or the format war is a prolonged thing that won't be decided for years it could mean trouble for the PS3. Right now 95% of people who watch movies on a regular basis are perfectly fine with DVDs. If Blue Ray wins I think the PS3 will ultimately become the best selling console, but as far as if it was worth it or not, Sony could have very well dominated another generation if they didn't make such an expensive technical powerhouse machine. They will lose lots of market share even in their best case senario.

Sony have should have made a loss leader av product seperately. Two $300 devices have a better chance of success than a single $600 product. $300 is the sweet spot for consumer devices.

So what do you say about the assumptions that BR-players might become cheaper as a stand alone then as a PS3?

Naturally they will.  I think BR is a great selling tool for the PS3, but it's not the only tool.  Current costs for standalones are $699, this will probably reduce to nearly half come the end of the year if predictions are to be believed...the PS3 is currently $599 and if they do reduce the cost of the machine it will probably just come down to $499 come the end of the year with a standalone starting at maybe $399.

Also, HDDVD is currently at around $399 at the moment already, so the sooner BluRay comes down the better all round.