A couple of points.
1) Bitrate does make a difference. T2 looks MUCH better on HD-DVD than on the WMV version. On the WMV one, and in fact all of the WMV HD titles banding is clearly visible. colour banding drives me nuts, it is one of those things that once you notice it is hard not to see.
2) 720P vs 1080P vs 1080i, it really depends on your display. If you have a native 1080P panel type display (e.g. LCD) then 720P tends to look awful as it has to be re-scaled. comparing 1080P on such a display, there is a huge difference, even at quite long viewing distances. If you have a CRT though, and run the 720P videos at 720P resolution, and the 1080P ones at 1080P resolution, then the difference really isn't that noticeable on reasonable sized displays. On a CRT projector though, you *really* see a difference between 720P and 1080. I run a 10ft wide screen and it really does make a huge difference. and the difference between the downloaded content and HD-DVD is also really really different, to the point where the compression artifacts (banding, mosquito noise etc.) really do annoy.
3) It depends what you are used to . Most americans don't notice the 60Hz judder, most europeans and australians can barely stand to watch it. Americans tend to notice the PAL 50Hz flicker, those of us who grew up with it tend not to. (although that is changing as people get used to high refresh and/or panel displays). A lot of things you don't notice at first, like the colour banding, or lack of black levels on LCD displays - but once you do , it becomes an annoyance. I wish I could un-notice things. The higher compression used for downloadable HD and even FTA TV really does suck once you notice it. sometimes much worse than others though. Some are just poorly encoded.
4) Physical Media vs Downloads. Physical media will be here for a long while yet. you get far better quality, don't have to worry about running out of storage or yr download quota. In australia, if you don't live in a capital city, then a $50 per month internet plan is limited to 5GB per month and a 1.5Mb connection or 8Mb at best ($70pm then) Doesn't get you a lot of movies.
In the capital cities it is better, but even then not available to everyone.
so a lot of the criticism is valid. the HD downloads are generally better than standard-def DVD, and it is cool being able to get 720P content that way, and easily, but until broadband gets a *lot* faster and a *lot* cheaper, the discs will continue to be a mainstream choice.
If you are happy with the way your movies look, then that is good enough. If you aren't there are better alternatives available. It is all good. we have never had such access to such high quality transfers for so little money.
You can buy a HD-DVD player for $149 and get movies for less than $30 each in the US, that is amazing quality for the money (and scale up yr DVDs). It wasn't long ago that laserdisc was the way with players costing a grand and the movies being up to $100 each, and the quality, by comparison was appalling.
These are amaazing times for movie lovers (if you overlook the DRM crapola).
Now if they would just enable 75Hz and 71.91Hz on the 360 or HD-DVD or Blu-Ray players so we could playback movies without judder, I'd be a happy boy