Apple definitely seems to be gunning for that exact scenario, and are well set up both in terms of hardware and software to become the biggest online distributor. They are now the 3rd biggest music retailer in the US (after Wal-Mart and Best Buy), with full control of the chain end to end and arguably the best user experience in existence today. I don't yet do HD video as far as I know (but could be wrong, the Apple TV actually supports 720p), but with ever increasing bandwidth it is only a matter of time.
I am very keen to get a true HD player that is not a PS3, but will hold on for a while more. It seemed for a while that Blu-Ray had the upper hand with the most studios supporting it, but now I am not so sure. The player that will make me drop the big bucks will have to play any format in existence and have a truly awesome performance with good old SD DVDs - the Denon DVD-1930 for example does a stunning job with those but supports neither HD format. The Samsung BD-P1200 has a really good SD scaler, and the 3rd gen players should hopefully also get that.
Pricing of both hardware and software titles will be the biggest factor to drive adoption, but that will probably stay quite high because of low volumes: very few people have HD displays and most casual viewers might not even notice the difference between regular DVDs and the HD material. The whole format war is causing too much confusion and there's a real risk both standards will be largely ignored by the average Joe consumer. The manufacturers should have agreed on a more pragmatic approach and quietly introduced it into all the DVD players, and THEN launched a massive campaign to sell everyone the same titles they already bought, but this time in HD.
By the way, there is now a 3rd contender - some UK company has figured out a way to make multi-layer red-laser disks, essentially reusing all the current DVD technology but allowing enough capacity to store 1080p content on them. They have demo'd players at CEDIA that are between $100-$200 - now that would have been a far better approach in the first place. I doubt they will get the studio support to really compete though.
