@ nightsurge
MikeB, your numbers and concepts are off quite a bit, my friend. The DVD used in Xbox games is DVD-9 which holds 7.95GB of data on average and some claim as much as 8.5GB.
No 360 game holds more than 6.8 GB per disc.
http://img.photobucket.com/albums/v152/deathkiller/1-2.pngNote the sheet is misleading though, regarding the 15 MB/s figure (PR marketing misrepresentation). That's the max speed of a single layer 360 DVD, on average a single layer 360 DVD is read slower and a dual layer 360 DVD is being read much slower.
Also, if Gears of War 2 can fit in a 6.8GB file, and look and perform as well as it does, what is the purpose of the extra space?
More graphics varierty or higher quality assets, less re-usage of data. In short room for better quality graphics and audio or alternative more variety. Fewer sacrifices to suit disc specifications, that's why developers have been complaining. DVD is usually enough for the Wii or PS2, for a HD console it's a considerable limiting factor.
Then, you mentioned something about Microsoft cleaning up the RRoD issues. You mentioned people buying new consoles. They don't do that.
To quote a friend a few days ago:
"Yesterday, the 3th of November 2009, my 1 year old XBox 360 Elite (the Zephyr version) died by the 3 Red Rings Of Death. " (Note the 2009 should actually be 2008

)
"will buy the Falcon-version of XBox 360 Elite, so if anything happens, then i have this backup anyway.."
You can read similar reports from (especially) early adopters all over the internet.
That is one reason why the PS3's attachment rate is so far off from the rest (a mere 5.3 as compared to an 8.1 of the 360).
That's not true, taking equal timeframes it's 6.5 for the 360, but if you look at the average months of ownership PS3 users buy just as many games per user per month. Taking equal timeframes the PS3 was delayed for 5 months in Europe and for the US the PS3 saw incredible year over year gains, meaning on average PS3 users owned their console for a shorter period of time.