Small numbers matter because this "war" will be decided at the small number level: 1%-2% is my guess. Nobody wants to get invested in large numbers and then see one die. Yes, both might survive, but I doubt it. More likely, one wins or both remain niche products like SACD & DVD-Audio.
I agree with you here, it is a small numbers thing. (if 50 million adapted HD-DVD or Blu-Ray and then tomorrow one or the other died? All the investment would be wasted--in many regards, but perhaps not all together) I also agree that there isn't enough room for both to be main stream. Either one dies or both remain, like you said, niche products.
However, to "win" a war, one format has to pull ahead of the other, in real numbers (enough that it makes it crazy to consider the other format), and you won't get that until the overall demand for hi-def discs dramatically increase. Now, do I expect that to be the same level of DVD's tomorrow? Of course not. How many years did it take DVDs to reach the level they are now? (more or less as soon as VHS was killed off recently, before that even DVD's could be considered "niche")
IMO, until the demand doubles (perhaps triples) for hi-def video, this war will continue. Even if, all studios were nautral, and all manufacturers were neutral, prices for hardware were the same, and you could equally get every movie on both formats, I don't see demand going up that much--together or separately. Because simply, the demand for HDTV in general--let alone Hi-def home movies--is so low. Although, I do believe demand would go up some, just not enough to push the "win" in one formats camp or the others.
Additionally, in todays ever changing landscape, if something isn't adapted quickly, it runs the risk of being out-dated before it ever gets off of the first floor. Blu-Ray and HD-DVD, IMHO, are both on the first floor (I'll grant Blu-Ray may be closer to the second, right now) and they've already been out for a while. What is to say, by the time either of them start making up ground, something else comes out that beats them to the punch? In this instance, they might be niche, but for all purposes, dead. Then the investment by consumers, manufactors, studios, etc. in both formats will have been wasted.