Originally Posted by mattvols
A review I read said that the system was really choppy and grainy without the update so I'm just going on that and its very possible that a new version could come out that would require a firmware update to be used and in that case you out of luck
Not really. When new media like this is developed, there is a panel of members that sets the standard. You might see additional content packaged a different way or requiring new standard compliance, but just like DVDs, your first generation player will still pretty much play every movie that comes out.
Now, I haven't looked at this model specifically (and wont because it's got the word Magnovox on it), but I suspect the sound output is lacking a bit and/or some codecs aren't included here (DolbyHD, TrueHD, etc.). They probably saved money on a less than the best upscaling routine for older formats. But, we've seen over the last few years that a majority of consumers seem much more interested in a lower cost than the absolute best quality possible (ex. mp3s, xvid, DiVX, etc.).
Streaming appears to be a solution to both. Much less up-front costs as it's built into more everyday devices (360, PS3, cable boxes, etc.) and increased quality for just a bit more cost on each title. Personally, I think you'll start seeing more and more plans like Netflix OnDemand competing with cable/sat OnDemand services giving the consumer another monthly bill that grants access to movies any time you want.