I imagine we will see $29.99 (or even less.. I would say even some as far as free if they were digitally distributed) release day games, but that the proportion of the game that will be included will be significantly reduced.. like you get the demo for free and $5 per level thereafter for example. All sorts of possibilities for pricing and making money in new ways for consoles.
I agree the use of discs seems a silly move, especially WRT new pricing models and the implications. IMO they should be optional; 50GB (?) is an infeasibly large download for a lot of places in the world today, but this is not the case everywhere nor forever. Digital distribution allows for more possibilities.
The problem with the reduced cost argument is that I really can't see cross platform developers pricing the Xbox version lower, so long as they believe it to be the equal to the PS4 version (which might not be the case, the PS4 seems it should have a little more graphics power). And as a consequence I can't see Xbox exclusives selling for less than those-- they won't want to appear inferior.
Add into that the fact that the PS4 will be cheaper too- I think who 'wins' in the upcoming generation may depend on how magic MS can make the kinect sensor-related software with media/TV control. If they can make it awesome and polished enough to make people forget about the fact they are putting an always connected '3d' camera into your home with an always-on internet connection in a device from one of the companies which has most-cooperated with the NSA (I wonder if they might justify the depth camera data as 'metadata'?), then I think MS could be on to a winner. If not, it seems advantage Sony so far.