To my understanding there is still a ways to go.
1) Fast motion like car scenes just becomes a blur and full of artifacts
2) No encryption system
3) No backup system in case of failure.
For example we use non-electronic matrix boards for automation, we had a power blackout today and everything came back on fine within about 20secs.(except the lightning set the a/c unit on fire!) Computers (especially mine) take at least 5mins to reboot and direct access on a 340gb disk wouldn't be the fast to find its place if it even remembered it.
I don't know how far I am off track here so any comments would be appreciated!
Company's have already shown that it can be done. The reviews I've read about the TI DLP have complained about digital artifacts and other relatively minor things. If the demand is found to put further money into this(and it does seem studios are interested), these problems will probably cease to exist.
As for the 340 gig hard disk array, the size is not really a big deal. HD arrays are just a way a mounting multiple disks to into one virtual disk. The tricky part is making it fast enough to provide enough data for streaming video. With multiple company's in the tech industry working towards this goal (for computing, not specifically for cinema), it probably won't be too long before the price is less stratospheric.
Anyway, I think that the technology will be there soon, but I doubt it will replace film quickly. In a few years maybe we'll find that all the big multiplex chains are buying one setup for each theater as a marketing gimic. I don't know. I sometimes wonder if the public is aware that theaters still run film. Yesterday I overheard a woman asking a manager if we could hit the rewind button so she could see the credits again. When my manager started explaining why we couldn't easily do that with platters, she said something like, "Oh... You mean you don't have VCR's up there?" Oh well.
Sorry for the long winded post... I guess it's been on my mind.