Hunt, I'm with you personally and can't really see downloads causing the extinction of physical discs, at least for HD or QD content, but most other people I know don't care about true HD audio/video quality. If they can get "good enough" or "decent" quality quickly via download then they will go that route.
Download speeds are an issue for now, but presumably as technology advances it will no longer be a concern.
The inability to make backup discs will always be there, but if the downloads are cheap enough then people won't be in an uproar if they need to purchase it again. It'd be no different than if they lost or damaged their physical disc.
As far as storage space goes, it's already cheap to get 1TB or 2TB and it will only get cheaper and bigger.
Just my $0.02
