I do remember what it was like playing PS1 games before the Dualshock came out. Those dual analog sticks were a godsend for 3D platformers and shooters (although a mouse and keyboard is still the best for the latter). It was something that, once I tried it, made me wonder why they didn't think of it to begin with. I was in elementary school when the first DualShock came out, so I wasn't really following gaming news online the way I do now. I've never heard about it being a problem before. :p
At my school, stuff like Quake, Tribes and Starcraft were pretty big back in the 90's/early 2000's. So I was happy to get online functionality on consoles. If we're talking about SegaNet, I begged my parents to put up money for me to connect after being able to borrow a friend's Dreamcast for a while. I was excited at the prospect of playing online on consoles years before the current gen started.
In those cases, those innovations served to enhance the experience ways that (for me anyway) were unambiguous. They either solved legitimate problems, or enhanced the experience in a way the old models couldn't. Kinect and the Wii have been around for a while, but neither has convinced me that motion controls are "the way of the future". I can't justify paying an extra $100 on a console for it.
There are plenty of things that the industry has pushed--full motion video, 3D screens, the PS Move, CD add-ons, weird ass peripherals like the Power Glove, and more--that simply never caught on, only become niche, or are just the backwash from fads. It's up to MS to prove that the Kinect doesn't fit into those categories, as they won't have the "separate add-on" excuse to deflect any questions or criticism. Not that it's a valid excuse when they've been pushing it so hard, but whatever.
The Xone's approach to handling games distribution, however, isn't some bold new innovation meant to enhance gaming. I only see a means a means of forcibly limiting people's options with physical copy to insulating the industry from market pressures, because MS was too pussy to either leave well enough alone or go all digital.
If MS and publsihers really want people to go digital, they can people to go that route on their own. They could implement the group sharing plan on digital copies only. They could lower prices on the digital copies, rather than charging full retail price and pocketing the difference--something that's pissed me off for years this gen. Instead of dumping all these restrictions on people's heads and telling them to suck it up or buy a 360, they could gradually pull people into going digital while still allowing the same options we have now on physical games.
You really think limiting those options will HELP a game like Remember Me sell at $60? Because I can only see people becoming more gunshy about games they're iffy about without them. Without the added value those options bring to their purchases, more people will wait until the game is dirt cheap or simply not buy it at all. I don't see it being the boon you or other industry people make it out to be.
And there are whole genres that have a very justifiable reason to be online all the time. WoW and Final Fantasy Xi have been around for almost a decade. If it makes sense from gameplay standpoint, then people won't assume you're just pretending it's not DRM (i.e. SimCity). And there are still plenty of places around the world, including here in the States, where networks aren't fast or reliable enough to make constant connections justifiable.
But I do agree with you that digital is inevitable. I fully expect consoles to be digital-only devices in the gen after next. But we won't be ready for that for several years, and the way online services and digital content have worked this gen don't convince me the industry is ready yet either. Which made MS's "my way or the highway" push so ridiculous.