I believe in solid state memory, but it's gonna take time... Until then, optical media won't be replaced, digital distribution will continue to grow but it won't take Nº 1 position until everyone (At least in the 3 big markets) have godspeed connections...
Microsoft is fooling people by saying that digital distribution is going to replace optical media soon, if that's the case, the HD-DVD add-on wasn't needed, the could go DD from the beginning and not waste money on the add-on, and their HDDs should be easily replaceable... If they're so sure about DD, they better do 2 SKU's of the nextbox: 1 with optical and a reasonable HDD & 1 without optical and a kickass, easily replaceable HDD