I suppose it was inevitable. Sony has lost so many format wars (VHS, MP3, Minidisc, memory stick, etc. etc.) they were bound to decide to just buy a victory eventually.
I have the HD-DVD add on drive for my Xbox360. I like it a lot. I also have an "upconverting" DVD player that shows my regular DVDs in HD. I like that a lot better. I bought it for $49.95 on sale at Best Buy. That said, I CAN tell a very, very slight difference between watching an HD-DVD disc and an upconverted DVD. Only on certain scenes, at certain times, if I'm looking very closely. Certainly not enough of a difference to justify the additional cost of HD-DVD players and discs. And if it's not worth the extra cash for HD-DVD, it's certainly not worth the even higher cost of Bluray.
Eventually, I'll get a PS3 so I can do the Bluray thing, and play the few PS3 exclusive titles I'm interested in. My guess is that for a good, long time the REAL winner of the "format war" will be the regular old DVD we've all come to know and love - played in upconverting players.