Nice thread dialup! I've been meaning to write my thoughts down on this situation...
This is definitely a major announcement, and really starts off 2008 with a bang. HD-DVD isn't totally dead just yet, but the prognosis is dire with little hope for improvement in the near future. With the press essentially declaring the war over, consumer mindshare will adjust accordingly and it will be a self-fulfilling prophecy.
So what happens with the death of HD-DVD? Not much.
Now that I've had an HDTV for a couple of weeks now, I see why people want HD content, but I don't see why people will want/need to rebuy their libraries. DVD is so entrenched into EVERYTHING that no disc-based format will ever supplant it. When you buy a DVD you can play it on your TV, in your car, any computer, portable players... the list just goes on and on. Because the only benefits to Blu-Ray are the better resolution and sound, which ONLY come about when using a good home theater setup, you won't see the same ubiquity that DVD has. And because you don't have the same ubiquity, people will STILL continue to buy their DVDs, while the audio/visual-philes will buy Blu-Ray discs, when previously they were buying BR and HD-DVD discs.
People said they were holding off on investing into Blu or Red for fear that the one they pick would lose. I honestly don't think the number of people who held off is that big. So now that the source of confusion is over, the real cause of the slow rate of adoption will rear its head: consumer apathy.
I have a few friends with HDTVs so I'm waiting to see if any of them go Blu, or even start talking about it. So far, nothing.