This topic is always so loaded with FUD it is unbelievable. First of all let me get some facts straight:
The current X360 (of which I own one so I am not an Anti-MS zealot) DOES NOT AND WILL NOT SUPPORT HDMI/HDCP. That must be implemented at the firmware of the video controller. Simply not possible. And I can tell you that there is word that MS will have to make another version of the X360 to even support HDMI. So if you own an X360 now you are outta luck either way. The announcement at CES was purely distractionary to disrupt the Blu-Ray buzz at CES. If it werent' for MS, HD-DVD would already be dead. Out of the 6 major studios, 5 support Blu-ray. 2 that were exclusive to HD-DVD (Paramount and Warner Bros) have moved to support both leaving ONLY ONE studio exclusive to HD-DVD (Universal). If you made a percentage to represent the currently available DVD movie library, HD-DVD would only have 30% of all available titles while Blu-Ray would be able to boast 90% of all the available library currently on DVD.
Let's talk about price. Am I the only one that remembers that Toshiba first announced the HD-DVD player would be $1000 and it would only do HD quality via encrypted HDMI? Now that it seems like Blu-Ray is gonna kill them (and btw, Gartner, Forrester and other research groups have all predicted BLu-ray will be the dominant format) the prices for their first players have dropped to $500 and $800. Coincidence? I don't think so. And HP softened their stance to supposedly support both formats cause MS put significant pressure on them (this comes from an HP insider I've spoken with - not made up). Disney and MS co-developed the iHD layer that HD-DVD uses and MS/HP are the only ones complaining that it isn't in the BLu-Ray spec - not even Disney cares that much about that. Of course Blu-Ray uses Java as their layer which is the main reason MS wants it gone. Furthermore, anti-MS sentiment in the Blu-Ray camp have led all of those partners to shy away from MS's VC-1 (WMV9) codec and instead use MPEG2 or H.264/AVC/MPEG4-Part 10. This is purely cause of MS's heavy handed tactics in this part of the industry. And while we are on price, it is important to keep perspective. The $1800 model that everyone uses as an example is NOT the same as the model Toshiba is offering. If you think a Pioneer elite player that plays Blu-Ray, streams multimedia formats over a network with the Digital Network Architecture protocol (WMA, MP3 . . .) and puts out all video at up to true 1080p, is the same as toshiba's plain jane player with 1080i output you are nuts. Keep in mind that HDMI version 1.3 that will support 1080p hasn't even been ratified so this is a significantly new thing they are doing. And every Blu-Ray player on the floor (except for Samsung's first model) supports true 1080p. NONE OF THE HD-DVD PLAYERS SUPPORT 1080P. And many TV's this year will support true 1080p in. The Blu-Ray camp have gone after a significantly different level of video performance. 1080/24psf (profressive segmented frames) is the format which hollywood digitally archives their films and that same quality will be delivered on the first Blu-Ray players.
As far as external drives go, Samsung showed an external Blu-Ray drive for PC's that should launch around $500. That is in the same ballpark as the HD-DVD external drives that are expected to ship for $500. You think MS is gonna sell a $500 add-on to a $300 console?!?!? You think they will subsidize the cost of an external and sink more into debt on the xbox division just so you can watch movies? And the AACS forum (the copy protection scheme used by BOTH CAMPS) recently ruled that studios can put a flag on the disc that MUST FORCE THE ANALOG OUTPUTS to 960x540p - 1 quarter the true rez of the disk and only slightly better than DVD. You gonna spend $500 for slighly better than DVD? Or are you gonna buy a new version of the 360 ($300) to support the encrypted digital out and then the $500 add on to get the full resolution? Wow, $800 after my intitial $400 for a premium system doesn't see so cheap. So if you know all the facts it is really commendable Sony is trying to deliver True 1080p over encrypted HDMI so people can play HD movies straight outta the box at full quality. MS screwed up, misread the market and didn't implement HDMI and now they have to try to fix it. YOU WILL SEE ANOTHER REV OF THE 360 with this added. Flame me now, but revisit this forum in 9 months and you can apologize.

And the FUD about layers just kills me. Panasonic has shown a laptop slimline BDROM drive for a laptop that can read dual layers, why the hell do you think Sony can't do it for the PS3?!?!? I've seen the drive, open and playing a frickin' movie at CES. And MS's guys say they haven't even made dual layer discs yet outside of a lab. Another piece of FUD. TDK has said several times that they currently produce them and are ready to go.
Sure Blu-Ray is more expensive to make. Did you cry when we went from Tape to CD? How about VHS to DVD? Those were much more significant differences and we seem to all have made it out just fine.
Finally I want to mention another major advantage between the two formats - Speed. The first movies authored on Blu-Ray wouldn't even play on HD-DVD. Fifth Element will supposedly offer video at 35Mbps and 5.1 UNCOMPRESSED audio. The max video bitrate for BDROM is 48Mbps which is way more than the total max bandwidth of HD-DVD at something in the mid 30's. The BLu-Ray camp has demonstrated that they should be able to hit 10x within a couple of years. This equates to 360Mbps of bandwidth which would be amazing to burn and read on a PC. And yes, I am aware that you can get better efficientcy if you don't use MPEG2 and instead use AVC. But, for the 2 years I've seen these demos at CES, the VC1 and AVC content looks far worse than MPEG2. My opinion is this is purely because MPEG2 encoders and decoders are so much more mature. It will certainly get better, but personally I want the best picture possible - I could care less what algorithm they use.
So, sorry to dissappoint, but the writing is on the wall. Look at the supporters. On the Blu-Ray side you have Dell, Apple, HP, Samsung and Sony. That is something like 90% of all PC's shipped. On the other side you have Hitachi, Toshiba and NEC - come on. And let's look at electronics brands. Sony, Sharp, Samsung, Mitsubishi, Pioneer on the Blu-Ray side. HD-DVD - Toshiba, Sanyo and RCA. Do you go to the store to buy an RCA or a Sanyo product? Do you see these Sam's CLub brands doing well on the market vs the Pioneer or Sony players who are targeting early adopters specifically looking for HD capability? It really is a shame that HD-DVD players won't be able to show the full 1080p functionality that will be on the discs. They have definitely gone for the cheaper route.
Okay, if I'm off on some of the facts, please point it out and send a link to an article showing where I'm off.