Oh this is just horrible. SIC.
Look, lets say the Xbox was going to cost $299 out of the box.
Now, without the DVD playback enabled, you can buy it for $250.
How is this a bad deal? If you do not NEED DVD, don't pay the extra cash. If you do, you can either buy it outright or get a $50 upgrade later on. More options = more markets. This is marketing, and it will work, simply because Microsoft doesn't fail. They will get the word out that you have the OPTION, and things will roll on like butter.