The problem with counting on DLC and Digital Distribution is that there is only a fixed amount of money to go after. Downloading cuts out middlemen, and shuts down the used game market, which allows the developers to get more, but there is a ceiling to what they get; so if the development costs keep rising, then they are only delaying the inevitable.
The Wii's success has brought new people in, which also brings fresh money in, meaning more revenue to go around; but this audience may have different tastes and demands than the old audience, so it doesn't necessarily mean more money for those expensive AAA games.
The only real solution is to find a ceiling and stay below it. If a new generation of consoles comes out with more powerful graphics that demand a huge increase in development costs, developers should just say "No".