The transition to all-MPEG4 will have to be thought out carefully. Obviously, anyone going to HD for the first time will now get a MPEG4 receiver, and that will help a lot as HD becomes more and more mainstream.
Beyond that, I suspect that E* will have to keep the lowest programming tier (now AT120) on MPEG2 for quite a long time. At some point, maybe you convert the premiums to MPEG4 SD (or HD!) and give those subs a deal to get a new MPEG4 box (which would also be HD, presumably). After that, you get the AT250 people, and then the AT200's converted.
As someone else mentioned, you could also convert by DMA, as the locals are put up in MPEG4. If you do this, you would probably switch over to HD locals for everyone, since the receivers would be HD anyway.
There will ultimately come a time when E* will not be able to entice the last MPEG2 holdouts to convert with a "deal," and then they will have to either just shut down the MPEG2's, or give everyone a box and move on.
It's gonna happen, and you can be sure the pain will be spread around.
Brad