It is amazing that the issue of next gen DVD technology is still undecided. The two competing technologies are Blu-ray and HD-DVD. The existence of two directly competing technologies leads to excessive market confusion and a slower adoption rate on both products.
IMO, one of the biggest battlegrounds of these two technologies is next gen videogame systems. Microsoft took the conservative approach (lame in my book) and chose only to include a standard DVD drive. IMO, this is an excessively conservative approach which could be problematic in the future due to the limited capacity of standard DVDs. Microsoft will be shipping an HD-DVD add-on for the Xbox360, but it is a weak effort because it does not support HDMI. The other issue is that HD-DVD may go away as mentioned in the first paragraph making the add-on kit potentially worthless. The other issue is that the HD add-on is not an inexpensive proposition. (Rumored price is around $300 for the add-on, on top of the $400 system = $700 total cost, about the same as a PS3) Of course, the standard system could still be used as a standard DVD player.
The issue with the PS3 is that Sony took a more aggressive approach. They went high end with their cell architecture, a next gen Blu-Ray drive and an HDMI interface. These are higher cost and more complex components than those included in the Xbox360 and it is rumored that the Blu-Ray drive has largely been responsible for the delays in shipping the PS3. Of course the PS3 has the advantage of being ready to play high definition DVDs out of the box. This added feature combine with HDMI is a potentially compelling value add of the PS3. Of course, if Blu Ray loses the next gen battle then the PS3 becomes worthless as a HD DVD unit.
The net result is that the two platforms are strongly invested in the HD DVD battle; it looks to me that Sony is bearing the greater risk. By building in the Blu-Ray, they have the benefit of larger disk capacities and included HD DVD functionality, but are dependant on the technology winning the next gen DVD battle. Microsoft, on the other hand, took a much more conservative approach including only a standard DVD drive and no HDMI. They have the benefit of more flexibility in adding HD DVD functionality as an add-on, but this adds cost and complexity. They also offer dramatically less storage capacity for the games on their platform.
Personally, I prefer the PS3 approach, but the general uncertainty of both HD DVD formats makes me think twice. I will not invest in either technology until the situation has stabilized, but may still consider the PS3. of course, I may still invest in the PS3, but I would make that purchase without giving any value to the HD DVD feature set of Blu Ray.