This makes financial sense. They can shield the dvd business from the ridiculous licensing fee's they are about to experience on the streaming side.
Qwikster is a wholly-owned subsidiary. What kind of non-apology move is this? Reed Hastings understands customers are upset about a price hike, so they'll show the value by putting up a big wall inside the company?
According to Motley Fool, streaming only subs are at 10M plans, streaming+DVD about 12M and disc-only is just over 2M subscribers. So discs aren't going away, but they are getting marginalized quickly by streaming. This move just seems to further alienate (some of) half their current subscriber base through increased inconvenience. They may have legitimate strategic reasons, but there's no reason instant and disc queues can't have the current level of basic integration.
Bandwidth is slowly but surely improving, so 1080p/multi-channel audio streams aren't too far away. The fact that America is geographically huge and rural areas are under-served doesn't change that broadband is nearly ubiquitous. Sooner or later, even the AV-philes with high-end HDTVs will be happy with streaming quality.