again: the aluminium MBs will absorb the MBA market completely. the MBA is a substandard MB lacking the optical drive - once you have aluminium MBs (much flatter than the plastic ones when released), the MBA will have become obsolete.
no, there won't be price drops on the MBA - that would prevent apple from breaking even.
Kind of. The MBA is a next-generation laptop, and nobody else seems to be able to make anything that looks as good. I think it's going the other way... the MB is being ditched in favour of the MBA at an aggressive price point. Yes, people will whinge about having no internal optical drive, but then they'll realise that they're a useless waste of space.
I use CDs and DVDs, yes, when I'm at HOME.
The only problem I can see is playing games on the go... there are still a few that want the disc inserted (even though it's such a 1997 concept). For everything else... if you need it frequently, make an image of it.
If you're the type that maybe visits clients and discusses material they have on CDs, then buy the external. It's small, sexy, and fills the (rather small) gap.
Remember, the MacBook Air is currently expensive for a reason... and what better way to be aggressive than to have an amazing price point for a product that your competitors can't even build let alone match the price
If this is what happens, I'm sure as hell buying one and getting rid of my old MacBook with its useless optical drive (that I've used once, other than for Leopard) that makes a "NIIIGREIIIIRINGRNF" noise whenever it wakes from sleep
<3

Edit:
Although they did do it a little early, remember that Apple was the first to ditch the floppy drive. With the whole AirDisk alternative, it wouldn't come as a surprise if Apple did something like this.
Edit 2:
Also, while officially "substandard" compared to the MacBook, this would also justify not increasing the specs too much and digging into the MacBook Pro market