All I can say is that your perception on the issue simply is not accurate. Neither format is a "small step up" from SD-DVD. Futhermore, you have it the wrong way around -- HD-DVD has a more advanced authoring environment than BluRay. What's more, the advanced "HDi" toolkit is mandatory for HD-DVD device certification which means that every single HD-DVD player on the market today can support the full range of HD-DVD interactive features. In contrast, the less featureful BD-Java tools available on BluRay are not mandatory which means that support for the more advanced features is not widespread. From an authoring standpoint this makes HD-DVD far more attractive -- if you employ the more advanced features you can be confident that consumers will be able to make use of them. With BluRay this is not the case. The player market for BluRay is a total mess of varying features and backward compatibility problems -- hardly a good position to be in for such a new format.
This notion of yours that BluRay is "the good one" and HD-DVD is "the cheap one" simply does not comport with the reality of the marketplace.
HD-DVDs benefits go far beyond the costs of manufacturing. Both from a consumer perspective (more advanced interactive features, more reasonable DRM and a lack of region codes being the highlights) and from a studio standpoint (cheaper to produce, better tools available, and a consistent user experience).
The only edge BluRay has from a technical standpoint is capacity.
Edit: and bandwidth, to be fair.
i love it when hd-dvd fanboys bring up requirements, "we require fullHD sound" blah blah blah, "mandatory this mandatory that." BUT before you speak, look at your savior title "transformers" that does not meet your requirements or mandatory check.
"The Audio: Rating the Sound
When audio specs for 'Transformers' were announced, there was a collective sigh of disappointment from early adopters when we learned that there would be no high-res audio tracks included on this disc. Given that this is such a flagship title for the studio, the decision was quite the head-scratcher.
Indeed, I had the opportunity to attend a special 'Transformers' media event with Paramount late last week, and the question was asked almost immediately -- why no Dolby TrueHD or uncompressed PCM? The studio's answer was that due to space limitations on the disc, the decision was made to limit the audio to Dolby Digital-Plus 5.1 Surround only (here at 1.5mbps). Unfortunately, this confirms the long-held theory that the 30Gb capacity of an HD-30 dual-layer HD DVD disc has forced studios to choose between offering a robust supplements package (as they've done here) and the very best in audio quality."
if the first major title on the format cant fit on a dual layer disc, imagine in 5 years if hd-dvd won, laserdisc all over again. (movies split over discs, wont last, lose the war)
blu-ray is better, far and away, im not a fan boy, but I researched and made a choice and am sticking with it. in fact, im willing to say that blu ray probably isnt the best solution, but when compared with hd-dvd, its the only.
there are about 100,000 people who want to believe they got an incredible deal on those sub $200 toshiba 1080i hd-dvd players, and they will justify it beyond belief.