That is indeed the coup-de-grace...
The analysis of this situation is pretty logical, in my view.
Sales of each format are becoming more equal each month. In fact the last 8 weeks have averaged about 60:40 for the movie sales - contrast that with the first 8 weeks of the year.
And now with new HD DVD player pricing, HD DVD player sales have a very good chance of leaving Bluray player sales in the dust. If this happens, Warner will recognize that future disc sales will be in HD DVD's favour, by a wider and wider margin.
In addition, the absence of BD 1.1 players from the market does not give comfort to any consideration Warner may be giving to choosing Bluray over HD DVD. Although a couple of BD 1.1 players are now on the horizon, most existing models will still be only BD 1.0 compliant, meaning that Warner's development efforts will be split, and further increase the costs of developing for the *already* more expensive Bluray format. And let's not forget that these "BD 1.1" players will actually be shipping as only BD 1.1 "capable" meaning that they STILL can't get BD 1.1 working, but will supposedly get a firmware update to enable it next year...
It's pretty obvious that this would make HD DVD the logical choice for Warner.
Of course, if the new HD DVD pricing has no effect at all on HD DVD player sales, then this would complicate the otherwise very easy decision. But I feel that it would be unrealistic to bank on this possibility.