I'm a Digital Distribution supporter, but as an OPTION, if i want to buy the game, music, movie, etc. in physical format i should be able to do so...
That being said, i think home consoles will not go digital, every time the bandwith grows, the game size grows as well, so unless bandwith wins that race bringing full retail games in less than half hour, games will still come in physical format...
My idea for a console is one that has an optical slot (BR, DVD, CD, etc.) and USB ports for multipurpose, a Flash Memory slot (propietary to avoid piracy, at least for a while) for full retail games, and Digital Distribution for all other games (indie, arcade, short, etc.)... But i don't think flash memory console games will be a reality considering the cost...