This seems to be security related. I guess they think they can ensure security with Vista (we won't mention that every previous endeavor has failed int his regard).
I think it will only be a matter of time until someone figures a way around this once again.
It is also further halting adoption of the HD technologies. Unless they drastically reduce prices from the $1000 levels that are in place now and do equivalent for the media (writable and commercial), it will only be longer until adoption takes off.
Look at DL DVD's (not quite the same but good enough for a concept), you can get drives for $30, but the media is still a few dollars per disc. I don't see much drive in this area. The cost needs to drop drastically on the media.
I think the same ties in with the HD outputs. HD is great, but if it costs $1000 for the player, the toys and media center boxes and the like are not an option, and disks are $30 or more each, is it really that much better to warrant me to make so many compromises?
Granted I make these comments without having seen the results of the new equipment, but unless a lot of changes happen, I don't see any reason to pursue the new formats.
Look at HD TV, how many years has it been? It's great, but how many channels can you get? I know this will change, but I just suspect HD DVD and the like will take a very long time before they achieve any widespread adoption.