Most likely the thought of installing the full game and playing without the disc will not come to fruition. BlueSwim, although people would probably buy a bigger capacity HD, in the long run, people would be buying less games. With the economy where it is at the moment, $60 is a lot to spend. Microsoft and its affiliates would be losing much more money in game sales due to this install feature.
I love the idea of not having to play the game without a disc, but there's just wayyy too many problems and obstacles that it just won't happen. I had some ideas like only limiting the install feature to one console, but I ended up scrapping it because even if you could only install the disc on one console only, you could still give the physical disc to a friend. In time, you'll see hackers hacking the install feature anyway.
Edit: Also, just to touch, Gamefly and Blockbuster are also beneficial to Microsoft. I believe Gamefly and Netflix are the same company. If so, I may be wrong, but in the new NXE Experience shit, Netflix is somehow making an appearance with its own section or something -- Live TV or something? Not sure. In addition, Blockbuster sells real copies of games, they aren't a pure rental company. Even if the idea came to fruition, like I said, it'd hurt these companies, which would cause a backlash.
The idea is great, especially to consumers, but from a company standpoint, it's bad. I'd root for your idea 100%, but it most likely wouldn't happen (officially), which is unfortunate to us consumers considering how the economy is at the moment. Someone might come up with a mod/hack though, you never know.