I agree w/ you for the most part though I don't think quite *that* many people actually bought hundreds of DVDs though. I think the ones who've bought hundreds are exactly the ones who'd visit sites like HTF (or would care to buy the latest-and-greatest anyway). The rest, which is probably well beyond 50% of the DVD households, have probably only bought a handful more DVDs than those "priced to own" VHS tapes -- afterall, somebody's keeping Netflix and Blockbuster in business.
I do also agree that most will not want to upgrade their entire collection to Blu-ray. Heck, I sure don't. But then again, my collection is as big as it is in large part because I ended up buying lots of marginal titles I wouldn't have bought if they weren't so cheap on DVD. In the end, I suspect most folks will just end up spending more or less the same $$$ on Blu-ray as on DVD beforehand. And if BD prices don't quite reach the bargain bin pricing levels that DVD has reached, most will just end up being more selective about what they buy and just end up w/ fewer titles -- the ones they really want on BD -- while spending about the same $$$.
Of course, I'm assuming BD pricing does gradually come down. If pricing really does not come down at all, then yeah, the studios will end up keeping Blu-ray a niche market.
_Man_