Just a quick note, assuming equal numbers of sales, less vendors = higher sales per vendor. There were less theaters showing Avatar and the tickets sold / theater rose, so until the very end of the article where actual numbers of tickets sold was listed, the argument didn't hold much weight.
Watching my 24" 1080p computer monitor from 3 feet away is roughly equivalent to watching your 52" plasma from 7 feet away. Being 3 feet away from a monitor is actually quite far, while being 7 feet from a 52" tv is quite close.
Your anecdotal example of 640x480 games looking the same at 1900x1200 (who uses 1900x1200? I didn't think 19:12 ratio screens existed?) must have come from a decade ago. Yes, some games used sprites that literally cannot scale up besides increasing the size of the pixels. 3D computer games DO scale up because computer models are inherently vector-based. Unless you were referring to XBOX, PS2, Wii and older generation consoles which were specifically designed for 480i/p (like DVDs) and don't scale up without stretching.
Your argument on screen size vs resolution is missing the vital variable of distance between viewer and screen. A 24" TV across the room won't be worth the price at 1080p, and 720p might even be iffy. But if it's on your desk, you can make out the individual pixels. I can't make out the pixels on my 15.6" 1080p at ~20" away, but I can on a 24" monitor.
I was thinking about some alternatives to DRM to encourage people to buy games and here's a few thoughts.
MMORPGs inherently require an online connection to play on official servers, and while a small portion of MMO players use private servers, the vast majority pay their monthly dues. Pirating is almost a non-issue for a game like World of Warcraft.
The Playstation 3 is probably the only console game system since the Nintendo 64 that isn't easy to pirate. Why? Either proprietary media (cartridges) or extremely expensive media (blu-ray discs). On a side note, I know many people who bought Nintendo DSs for the sole reason that it's trivially easy to download hundreds of games, stick them on a single SD card, and load them into their DS for quick access to almost the entire library of games worth playing on the system.
Even if you have a blu-ray burner and an abundance of BD-Rs (which would take pirating hundreds of games to make up the cost of the BD-Rs and burner), would you really want to download a 25-50GB game that you may not even like, assuming that a mod-chip becomes available for the PS3 in the near-future? You might notice, however, that most PS3 games are only 5-10GB as they're designed to be ported to both 360 and PS3 (and sometimes PC). But look at a game like MGS4. It not only completely fills a double layer blu-ray disc, but it requires installation and decompression 4 times in the game.
So give the customer a more precise RtB: pirating the game will be possible, but won't be worth your time. Make games require multiple DVDs to play because they have an abundance of uncompressed, high quality audio for voices, sound effects and music, then don't allow other compressed formats (like mp3) to work with the program to prevent warez groups from compressing the audio themselves. Do the same with the Pre-rendered video. Make textures as high quality as they can before slowing systems down. Essentially, make the game so large that it takes days or even weeks to download, and eat up 25+ GB on the pirate's hard drive, while a legitimate customer would just be switching DVDs every so often. Give the game a very good multi-player experience, and ensure you only allow legitimate cd-keys on your servers.