Take a look at this article:
[Link: ultimateavmag.com]
From the signs coming from both HD disc formats, down-rezzing may not be up to the disc publisher, but mandated by the disc licsense.
Hollywood likes it (no 'analog hole')
The creators of BR and HDDVD all like it (manufaturers like Sony, Philips, JVC, Toshiba, Panasonic, et all), (go buy a new TV).

So instead of a system that has 8 sources of video and 8 zones to display that video in, you will be forced to get 8 BD/HDDVD players, 8 HD cable/sat boxes, and put them in each zone, and not be able to have any global features like Kaliedascape, ReQuest, or other servers. Kind of sucks, eh?

See, I think this is a strategic mistake on the part of the manufacturers. The percentage of people doing custom whole house mutlizone systems today is small when compared to the typical BB customer that the big manufacturers are playing to. However whole house systems are becoming more affordable, and are starting to appeal the the BB customer. In addition, more and more new construction projects are planning for whole house systems. So the market potential for selling displays and devices per household is increasing. Where today, Joe average might have 1 HD and 2 SD TVs in his house, there is a potential to have that average move up to 4 HD TVs, and more if you include touch panels. But with these looming problems, Joe Average's options are limited, so he might opt for less TVs.
In short, I believe that affordable whole house systems will sell additional HD TVs throughout the home, but only if they can be integrated into the whole system.