Every new technology should logially be downwardly compatible with older media forms.
Actually it shouldn't. This is how we end up with stagnating development as well as an entire messy situation. Being a software developer, I've seen first hand trying to develop new projects with an existing system in place and to actually merge the old system into the new while making the new one as good as it can be is impossible. It's how we get left with terrible operating systems which 'need' backwards compatability.
In the end we get poor technology whose limitation was only left in due to an older system. Imagine if CDs were all the same size and as fragile as records. Which means we'd have DVDs which were the same, and the audio quality could never increase due to physical limitations of the gramophone.
The logical step is to infact scrap the entire system each time you're going to overhaul it. It makes more financial sense on the part of the company, and you're free to make the best piece of technology you can AND you don't have the limitations of the existing software.
To put in 3-4 generations of old technology in one system generally leads to more bugs and faults and a much harder to use piece of technology.
Plus this isn't really relevant in this case either. HD items DO play DVDs, but due to the DVD not holding enough information, they can appear fuzzy or pixelated on larger screens since most of the pixels don't actually exist and it has to guess what information is there.