Downconversion for Blu-ray and HD-DVD?

I used to be a huge home theater buff. I was one of the early adopters of the DVD format, and on more than one occassion, I was tempted to purchase one of those new big screen LCD televisions so that I could get the most out of my DVD player and the rapidly expanding DVD library. This was of course, years ago, before my Everquest addiction. In many ways, having spent that time in Norrath probably saved me tens of thousands of dollars that I might have otherwise spent on Electronics and DVDs.
A few days ago, I predicted that Blu-ray was likely to become the new standard in high-definition media, while HD-DVD was likely to befall the same fate as Circuit City's DivX format. Today, there are whisperings that both Blu-ray and HD-DVD will need to downconvert HD signals for analog inputs.

Instead, the affected analog signal must be "down-converted" from the full 1920x1080 lines of resolution the players are capable of outputting to 960x540 lines-"a resolution closer to standard DVDs than to high-def. Standard DVDs are typically encoded at 720 horizontal by 480 vertical lines of resolution.
The 960x540 standard stipulated in the AACS agreement represents 50% higher resolution than standard-def, but only one-quarter the resolution of full high-def. Whether a particular movie is down-converted will be up to the studio.
Clearly this option will not be popular amongst those early adopters whose first generation HDTVs were manufactured without digital inputs since a standard had not yet been decided on at the time of production. The down converted signal would be a little bit better than DVD quality.