Everyone also seems to be forgetting that this is a process that's going to take awhile, and that compression technology will be beyond what it is today. Also, MP3's with a high bitrate and proper audio processing software (a.k.a not standard media players) give almost equal quality to Cd's. That's right now, 2-5 years from now you don't think Sony, MS, and Nintendo will be able to make sure that their compressed games when expanded offer the EXACT same quality as their physical media games do?
Beyond that, the only two WiiWare games I've seen (Lost Wind(s?) and FF:CC) look graphically superior to first gen first party Wii games (Zelda:TP for example) and close to games like Galaxy and Brawl, so I don't think it's going to be much of a problem. The game is created first and then compressed, so the only losses would take place in the (de)compression software, which considering that Nintendo is responsible for it, will likely produce great results, Nintendo's seal of quality still means something to me. Wii's don't break down or burn out (if they do it's at least not with a 16% fail rate like MS) and first party Nintendo games are always of a high quality (even Mario Party games).
I wonder if people were this scared when Cd's were introduced to replace vinyl's.
It is important to have a tangible copy so that you can't accidently delete it or lose it when your HD breaks down.
How does that compare to Cd's getting scratched? You can't bring it back to the store and get a refund because it was damaged. Contrary to that, if you accidentally delete or lose your digital copy when your HD breaks down (forget the fact that infinitely less volatile flash memory will likely be used in next gen consoles since a "relatively cheap" 64GB SSD will be more than most people need, right now one of those are pretty expensive upwards of $600 but mass production will drive those costs down) you can easily re-download the media, instead of having to re-buy a physical copy...
So let's see, I can either buy physical media and be completely screwed over when it gets damaged, OR, I can buy digital media and have lifetime (to be truly realistic I guess it's the lifetime of the company providing the media and not you) insurance on it.
Seems like a pretty easy choice to me. Perhaps I missed something though.