I guess I'm just not seeing the confusion you guys are seeing, but either way, I hope you don't base your thoughts that there is confusion based on what people opinions are in forums and/or on a few customers in stores that seemed confused. It likely those same customers would be confused over the difference between 4:3 and 16:9... or SD vs HD... and many other things as well.
I have several buddies around here that have HD sets at home. They never visit online forums and such, but they completely understand the difference between Blu-ray and HD-DVD. I think it only gets as complicated or confusing as we want it to be. It's actually very simple and much easier to understand than it is that Ford and Chev are two different manufacturers and they make several brands of cars. We have hundreds of different speaker manufacturers to choose from... some producing different sounds than others. There are always going to be choices and decisions to be made.
That pretty HD picture that people see at my house is from Dish Network. It's not hard for most people to understand that there is Dish, DirecTV and various cable companies depending on where you live. Each offer different HD channels. Oh but wait... each company has receivers with different features. You have to decide which channels and which features you want... or you could pay more and get both.
Generally, if the consumer really wants to understand it, they will research it and figure it out. It's one reason we have forums like this one. Otherwise they will simply go with whatever the salesman sells them, whether it be Blu-ray, HD-DVD, Ford, Chev, Dish or DirecTV.
Since the format war has gone as far as it has, to me it would make sense to continue and by continuing force the studios to all produce movies in both formats. Otherwise I and thousands of others who have spent a lot of money on one format or the other are going to end up with a player that will only play the movies we've already purchased and nothing new. And when that player tears up... the HD movies we purchased are no longer worth anything because we can't find a player for them. Yet, if there are dual format players, none of us have anything to worry about. Once our one format player tears up or wears out, we can get a replacement. We even have the option of buying a dual format so that we can enjoy both formats.