I agree with basically everything you say. But I do think there is another model for game distribution they could have in mind: partial downloads on demand. You buy the game, it downloads 10% of the game and lets you start playing, as you play through it has to download more, and if you never finish the game, it never actually downloads the whole thing. I imagine MMOs already operate this way, so it's not a novel idea or anything, but using it for every game for a console could be a new take on using the technique.
I don't think this is a good idea to do for a console right now because 10% could still easily be 500MB, which can be a daunting download on PSN, even with a good connection. But I can see that being a desired approach for the future from the standpoint of distribution and piracy. People that play 15% of the game download 15% of the game and, since you download the game a chunk at a time as you play, I would imagine there is an argument to be made for how this could prevent piracy.
I don't know if it would actually put a dent in piracy, but I can imagine people convincing execs that it will.