Online downloads are BS, they're only 720p HD and not the full 1080p HD of Blu-ray. Pinocchio itself was some 23GB (!) and that's an 88 movie. What computer has the space to store all your films even with an external hard drive? Never mind the bonus content, or anybody who doesn't want to watch a movie on their computer. People will of course still download movies for convince but they'll never get Blu-ray quality stuff or fully loaded special editions from any torrent.
A recent test done with an audience to see if they would notice the difference between itunes HD (720p) and Blu-ray (1080p) without knowing which is which and the unanimous consensus was that Blu-ray was better.
Sales have been increasing all the time worldwide and prices are coming down faster than most people think. Wal-Mart already had $99 player for Father's Day so how long will it take for others to drop in price? The introductory price for the PS3 slim was $299 and it'll come down too with time.
And since Blu-ray players are backward compatible, what would be the point in manufacturing DVD only players if you could buy a Blu-ray player for $100 at any local media/video store?
Blu-ray will pick up in pace and eventually replace DVD in terms of production. Nobody will have to get rid of their DVDs and never use them again, but there will be a point when home video companies will stop making standard definition discs and just choose the newer format like Lasedisc begin replaced with DVD.