I'm going to wait a while until I see what format is doing better. I'm definitely going to buy a PS3 eventually, but that does not necessary make me settle with Bluray, because I would rather want a dedicated player for movies anyway (just look at the PS2, the built in DVD player can barely even compete with lowend dedicated players)
The downconversion thing when using analog does not bother me at all, sure sucks for those who were early buying their HDTV, but as with everything if you buy technology that has not settled yet you are always taking a gamble. It would have been much worse if they had not provided any way to get video without HDCP. I myself have made several stupid buying decisions in the past, just because I wanted to have something early.
What annoys me is that it appears like HDDVD and Bluray are not going to have encapsulated media (like say minidiscs). Just a tiny dustparticle is going to results in gigabytes of unreadable data.
Well even though I usually root for the better technology. I must say that HDDVD has a lot going for it. BluRay's only real advantage being better storage capacity. But knowing Sony, they tend to invent a lot of own technologies that they take too high licensing fees for and crippled by copy protections, resulting in smaller companies avoiding using them and higher prices for the consumer (remember memory sticks, minidiscs etc..)
Considering most TV's can't handle 1080p and many would settle with 720p, I think the storage capacity is less significant factor in the format war. The main factor is going to be cost and availability, therefore I think Bluray even though technically better is going to loose. The average people are not going to notice quality difference, they are going to look at the prices and when they see the HDDVD logo they know instantly what it is. Bluray is probably going to end up like a technology for the techgeeks, like LaserDisc.
Personally I'm somewhere inbetween average consumer and the ubergeek, I don't particularly care about the storage capacity difference. My equipment is going to be best suited for 720p anyway. I'm actually more worried about if the media is encapsulated or not, I would rather pay more for something I can use and leave on the table, without it being instantly destroyed by a roaming dustparticle
EDIT: Oh almost forgot one of the most important things, easiness to pirate and manuafacture. If the other format would become much easier to copy, it would gain much ground.
Then already existing DVD pressing factories have to just make a minor upgrade to press HD-DVD's. While for BluRay they would have to invest in completely new equipment.. For those that have been in "less rich" countries, probably know how usual it is with factory made DVD bootlegs avaible everywhere. I bet HDDVD will be the bootleggers favourite format, because they just have to make a minor upgrade on their equipment.