It really is amazing that studios bought into that mess, but what they really were buying into was Sony's claims that Blu-Ray had "unbreakable" security and movies could not be ripped. That was all proven false within a week of release of the format.
I was an early adopter of both formats. Had a beautiful Toshiba HD-DVD player and bought into Blu-Ray with the PS3. HD-DVD was far and away the better format. Basically the BD Group convinced some poor schleps that 50GB discs actually mattered and "bigger was better" when in reality most movies, even completely decompressed, don't take up more than 20GB of disc real estate.
The proof positive came in the HD-DVD and Blu-ray releases of Batman Begins and Mission Impossible III. Both movies featured PiP commentary, but the way they achieved that was a completely different matter.
On HD-DVD there was one single encode of the movie, there was a separate encode of the PiP which you could bring up seamlessly by pressing a Pop Up button. One simple encode on a 25GB disc.
The BD discs were a whole different story. They both came on 50GB discs, and both used the same actual encoding of the movies from their HD-DVD version, just converted into the BD proprietary format. However since there were no standards, and some players could not handle PiP they had to put the movie on the disc twice. Once with just the movie, the second time with the PiP burned into the encode. To make matters worse when you pressed the button to engage the PiP, there was a brief pause in the movie as the player switched branches over to the encode with the PiP. Just brutal, and hardly cutting edge.
Yancy