As per most replies here my issue would be with the broadband speeds.
Its shockingly bad where I live so this is pretty much a non-starter for me. Some demo's have taken up to 8 hours to download, can you imagine how long something like Gran Tursimo would take which is apparently coming on 3 blu-ray discs?
No, it wont kill consoles. This thing will be forgotten like the Virtua boy.
I used to love my Virtua Boy, wasn't so keen on the headaches it caused me for skipping the break warnings though lol.
Console gaming will never die, it may well change to downloadable media only, but it will never die. As long as we have spare time there will always be a need to fill it, and for the unhealthy lazy people like me there is no better way than to sit on my arse and play on my PS3 on my nice big HD telly :).