If I can't play my 100 game backlog of XBLA/few games on demand and less so indie games (would like to be able to play them too but this won't stop me if I can at least have xbla / games on demand) then I'll probably skip out on the next Xbox at least for awhile until I can find a really good price on one. what would really upset me even more would be if they made the 360 unable to connect to live or something and make it so you can't play any of your content (i think if you aren't online you cant? or i've had that happen before where i didnt have internet for a couple months and several things were unable to access).
i dont think they will cancel out the 360 when they release a next gen console though, they're still selling content and they've sold so many consoles at this point, seems pointless to ever do away with it until they're losing money on it.
Well from what I understand you can play all your content offline as long as it was the console that holds the licence for that content. So lets say you have an xbox (xbox A) and you buy a bunch of xbox live arcade games for it. You then go to a friends house and redownload those games on his xbox (xbox B). You can play all your xbox live arcade games on xbox A offline since the licences are registered to xbox A. However if your friend tried to play those xbox live arcade games offline he would only see them as a trial version. The only way to play the full arcade games on Xbox B would be to sign in the account that purchased those games and remain connected to xbox live. Microsoft has allowed users to transfer licences to other xboxes and removing it from the original because of things like RROD or if a customer gets a new console. Here is more information on the Digital Rights Management for xbox.