i think both blu ray and dvd will coexist for some time. due to the physical disc compatibility there isn't a huge motivation to drop the predecessor like there was going from tapes say to cd. those that want a higher image will get the blu ray on their hi def tv's and those that are content with dvd will stick with that and not see a need to upgrade. i dont think dvd has to die necessarily for blu ray to have a successful future.
only when 1080p sets are standard and blu ray players are the only devices that are made will dvd's probably be phased out. but that's a long way from happening, as there's a lot of people who are still using tube tv's where dvd is fine and blu ray is irrelevant and will probably skip the whole first phase of widespread flat panel adoption, and only upgrade when their set eventually dies a few years down the road.
+1
"only when 1080p sets are standard and blu ray players are the only devices that are made will dvd's probably be phased out."
Sadly, even then there is no guarantee the public is going to rush into the arms of Blu-Ray. Considering the fact that of people with HDTVs, only around 10% actually watch HD content on their sets (and that percentage hasn't risen much since 2007), BD's 1080p picture quality is not turning into a magic pill convincing everyone to rush out and make the jump. I believe Hollywood should have gone for something more convincing than BD's 1,080 lines of vertical resolution, say something with approximately 4,000 pixels of horizontal resolution like 4K.