Downloadable content is definitly the way to go. By breaking a game into chapters and giving it to users a piece at a time you could help deter pirating.
By having the game broken apart into episodes you force pirates to do a lot more work. Each episode has to be cracked, uploaded to pirate area, then distributed to users. A user will then have to install it on their system, hope then it won't bring a long any unwanted nonsense and won't have any conflicts or overwrite their saved games. where is a user getting it from a place like Steam would have it downloaded automatically as soon as its available. I think that this convenience factor could do to games what iTunes did for music.
On another note I also think that having a game in chapters might make it more enjoyable. I know that when I get a new game that I savagely jump into to it for hours on end until I finish it. This leads to me not really get the most out of the game. I don't take the time to fully enjoy it. Usually some where around hour 18 I really start to hate it (because no one can enjoy doing anything for 18 hours straight) and my only goal becomes to beat it as soon as possible. Having it spread out will give it to me in nice size doses that I am able to savor.