Cost of the player is still too high. When it gets down to around $100, way more people would make that jump. Same deal with the discs, you're paying about a $10 a movie premium for the BRD, most are skipping it to go with the cheaper DVD. One thing that might help with that is if they did something similar to what HD-DVD did, and release movies with the BRD movie on one side, and the standard DVD on the flip side. That would at least get people to consider buying the BRD version, as they would be 'future-proofing' themselves, and they'd be more likely to buy the player or more of those discs.
The other aspect is the 'so what?' factor. Blu-ray was touted as this next big leap, but aside from a better picture, they aren't taking advantage of it. With so many people with either old TVs, or HDTVs that are too small, or too far away, the DVD movie looks pretty good, and the BRD isn't enough of a game-changer.
With DVDs, it was a big leap forward. Way better picture, smaller package, Special features were a new thing, no rewinding, you can start at any point in the movie, etc. What does Blu-ray add to this conversation? They touted all the extras you could cram on the much larger disc, how you could get entire seasons of a show on a single disc, etc. None of that is happening, and right now, BRD movies are just regular DVD releases with better picture. Some have even FEWER features, waiting for a double-dip. If you can't add something worth making the purchase, there's no reason to spend the extra money on the BRD version. Definitely nicer picture, but except for a couple really visual-oriented movies, most of the time DVD is more than enough...
And at this point, Blu-ray is on borrowed time. Already rumors about super-DVD, or whatever they are going to call it. Why buy into Blu-Ray when it hasn't caught on after a couple years, and it's about to become dated tech?