I'd hope that MS would get "hardcore" with the copyright holders. They need to beat into them idea that once this is out there, they don't have to pay for anything. They don't need to press, seal, deliver and advertise discs like they do with traditional compilations. They don't have to pay for an expensive cartridge for the GBA. They give MS the ROMs and software, let MS deal with delivery of the content, advertising, and transactions fees/collections, and cash the check from their cut. If they want MS to price the game at an outrageous amount in XBLA, so be it. If they look at their XBLA sales and see that they suck, MS can turn around and show the amazing money rolling in on someone else's game that is priced according to demand, then say "We told ya."
For me, XBLA offers me a chance to play something for 10~15 minutes whilst waiting for friends to show up online, or when I only have 10~15 minutes to play and don't feel like popping in full game. Arcades used to be about socializing, competition, and wasting a little time while you had some cheap fun. XBLA has the potential to offer some of that again (especially if they can build in a "spectator" mode).
