Yes, digital downloads only would be a depressing outlook for me and they are not the way I see my music collection growing. I use them for music I can't easily find on disc in the shops/online, e.g. some trance music tracks which are good for listening to in the gym, whilst out for a run or driving in the car but not necessarily during a hifi listening session. I do prefer collecting CD's to rifle through rather than pressing a button to sort and select tracks and playlists. I've ripped a few hundred of my CD's to Windows media player and I listen to music on that when I'm surfing the net, but that's for convenience.
There's a certain amount of exitement about getting a new CD rather than a download. To me it's like opening a present (as opposed to receiving a voucher). I agree awith your point about the artwork, and also the packaging and liner notes make it more appealing than a download. The physical nature of the product gives it a greater perceived value, not just in money terms but in how I feel about the collection I own.
As far as how the market will change, I think there will always be a mixture. Downloading digital content will increase, but it will not replace physical formats.
Because of the massive ownership of CD players throughout the world, and the "inertia" against change that causes in the majority of the market, I believe it is likely that CD will be around for a good few years yet. I'm quite sure that I'll still be able to browse a huge range of CD's on Amazon both new and old in 10 years time. The move toward SACD is probably stalled rather than dead, and we may see an increasing number of hybrid discs being sold in the coming years. The difference in quality to most members of the public between CD and SACD is not sufficient to warrant a change in hardware, so a gradual change using the hybrid technology seems to be quite a sensible way to go in the general move towards "HD everything".
I think that vinyl will always be a niche/hobbyist section of the market, albeit with an increase in popularity at the moment. I might even try it myself when funds permit, but CD in whichever form will always be my main format.
Enjoy the music.
Regards,
Mike.