I don't think you'll ever be able to download a great big guitar shaped controller ![]()
But Internet connections are getting faster, and the connections we have now are fine for downloading the vast majority of games out there (ignoring games like Blue Dragon). I have a feeble 1mb connection, and I've had no problem using Steam or Playstation Store to download gigs of demos and games.
I'm also sure developers knowing their primary medium is the Internet will start taking measures to shrink their game size, maybe compiling all those prebaked assets during the installation procedure? Whatever, things can be done.
I think developers would much prefer these methods, they lose less money on the publisher, it allows Indy developers much more freedom and exposure, and binding things to an account like Steam also reduces piracy (it doesn't stop it of course, nothing does).
I was initally really against things like Steam, Xbox Live/Arcade, Playstation Store, DLSite, etc. because I liked the physical disk, box and manual. But these days they seem like a much better option. People on 56k's be damned.