Another problem with digital downloads is the questions of rights holders. There are many cases where an IP changes corporate hands and therefore the distribution has to change. There are games on the 360 that people have bought, deleted, and then when they try to redone load then they are unable to because it is no longer allowed to be distributed on Xbox Live, this making your purchase void without any type of refund. I will look for the source.
Digital downloads are a great idea, however I am unsure as to whether the industry is ready for them or has figured out how best to utilize them.