I personally follow your logic. I am much more likely to buy a BluRay later on and be happier because I get to keep it for about the same price or less than the rental. In fact a significant part of my movie collection is from the bargain table where they sell the former Redbox rentals and the like, I rarely pay normal retail for anything.
A house full of kids and family is a different thing. I consider what I described as an event, not a habit or one-off viewing. I can buy disks for my own thing as a habit and would by default rather use something in my own library. If however it's a kids birthday and I they want a movie party it's cheaper to do it the way the article describes than it is to rent the theater, or buy a bunch of tickets. When it comes to a kids birthday party all the kids probably already watched what's in my video library, possibly on other one off occasions at my place. In short I consider it completely different than a pay-per-view that you seem to be comparing it to. If I did it at this price once a year it would be surprising, but I would like the option to exist. In fact I wouldn't be against a sliding scale, even $100 during the premier week, $50 the next week etc... If it were for an event it would still be cheaper than buying a bunch of tickets or renting out a birthday/event room, and the kids can watch it in their pajamas and not worry about noise levels the way they wouldn't in a theater anyways.
Consider this a favor to movie goers that I keep this bunch out of the theater.