Well the points I hear here, soem are utter rubbish.
One the difference of what VHS displayed (the data not how you tv handles it) and DVD while dramatic is not as significant as the difference between DVD and 1080i.
Now the stickler for that is that you might have a HDTV (if you do) that either isn't large enough or not 1080i to allow you to actually see the difference.
For example my 50 inch 1080i running a standard film DVD looks okay, but sowing a blue ray 1080i form of that same film is a huge difference.
But showing that same film on my 35 inch 720 doesn't have near the jump in viewable quality.
You make many good points, but this isn't one of them. Does a HD disk look better than a DVD, especially on a larger screen? Of course.
But when people are talking about the marked improvement between VHS and DVD, it's the whole package. VHS tapes wear out quickly, have a much grainier look to the picture, you get lines, the sound isn't as good at all (I defy anyone to find a Dolby Surround VHS tape that's been played more than three times that still has the rear sound working properly), you have to rewind them, they jam, all the extras included in DVDs, they are bigger and harder to shelve, on and on.
To most people, a Blu Ray is a DVD with a better picture. That's it. The incentive to buy just isn't there, especially when most people have a 32-42 inch HDTV, many of them only 720p. We're talking about a large sample, not you as an individual. They'll sell millions of them between PS3s and all the units they basically give away with home theatre packages, and now that they're hitting the $200 range they'll sell even more, but I think people's point that they are usually $5-10 more expsensive than first-run DVD movies is a very valid one. A lot of the people I know with PS3s own a couple of BluRay movies like Iron Man and Transformers just to show it off, but they still spend most of their money buying DVDs.