I think digital download will be the way that things go, after all it gives greater control over the game media to the companies i.e. no resales. Two major problems tho that mean not only are we not there yet but also a fair way from it being storage at the user end and user download speeds.
In terms of storage to hold a game library and full hd movies your talking multiple terabytes which isn't cheap or with current technology small in terms of the physical size of those drives.
Next you have the download speed, superfast broadband isn't universal which can already mean slow downloads on services like steam for many users. If you then consider the widespread downloading of large volumes of data to multiple homes that too further compounds the issue, an example we have already seen with the adoption of 3g phones strangling mobile network bandwidths. Then you have to consider the in home speed issues, already even with a wireless-n system home wifi isn't at the point where it can handle hd content and other traffic moving around the home and now you want to add more traffic as massive game downloads on top.
Personally i think were maybe still another 1 or 2 generations of consoles (if there even still with us) away from being at the stage where we could even consider a fully digital console and have widespread digial downloads
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