The better product rarely wins out. Otherwise we would all be typing on Apple computers, been using betamax instead of VHF, watching 1920x1080p panels instead of 1024x768 panels, etc. The best value product will win out in the long run and right now we don't know what that is going to be. Disc availability and player cost will have a great influence on the ultimate winner.
Realistically there probably is not more than $50 cost difference in a Blu-ray player and a HD-DVD player, but there is a great retail difference. Sounds like a royalty deal like betamax was to me.
If people can buy a HD-DVD player for half the cost of a Blu-ray player and watch the same movie on it, I think the best price will win. The extra space on the Blu-ray disc will just be wasted. Just like it is possible to put at least 150 songs on a single CD, but they only put 30 or less on them. Sure the CD audio is uncompressed, but the real reason is they can't get $1 per song on a 150 song disc. By the same token they are not going to put 2 movies on a single disc and try to sell it at double the cost. jmo, I expect the HD-DVD to be very popular once it is out.