I personally still use Netflix primarily as a mail service for DVDs and Blu-rays --- for real geek-out purists, HD streaming probably won't compete with Blu-ray quality for many years (especially since it's not solely a matter of compression technology, as it's also hampered by DRM quibbles, bandwidth, etc.). Even a well-mastered DVD displayed with a good scaler can still offer better quality than most streaming HD encodes, since perceived quality is a matter of many more factors than just raw resolution (in fact, using the same codec and constrained bitrate, a movie encoded in SD will often have more perceived detail than one encoded in HD).
I'm not the 'need it now!' type, so for me Netflix streaming is just a cool bonus that, unfortunately, ends up not being much of a bonus at all; I'm also a little peeved that my Netflix bill keeps inching up, purely to support a feature that is essentially unusable. It's also the fact that I do support Netflix and have been a fan of their service for almost a decade, that they're supposed to be the leader in this field, and yet they really seem to be dropping the ball. Amazon offers 5.1 sound, decent streaming, and a download-model that allows for butter-smooth playback. I abhor Apple, but iTunes also offers 5.1 sound, 1080p content, and has no playback issues. Heck, I recently discovered a site called Mubi.com that has some fantastically esoteric stuff, and even they have better quality playback. Right now, because of their stuttering issues, the unacceptable VHS quality of the Starz encodes, and their audio limitations, I'd say Netflix is in the bottom of the pack, ahead of only Greencine and Blockbuster's VOD quailty (which, oh boy, is not saying much).
Netflix needs to sit down with Starz and establish some stringent quality guidelines, realize how backwards it is to offer something like Battlestar Galactica in HD but with only 160kbs stereo sound, and to completely fix their frame-drop issues, even if that means dropping Silverlight all together. Simply, they need to slow down: they keep adding more and more content without improving the underlying service. Now, if the rumors are true and they end up removing mail service entirely in favor of streaming --- and if they still have the same issues --- then I'll drop 'em like a sack of potatoes.
Also, this isn't even to mention how most of these guys (Netflix, Amazon, iTunes, Vudu) only offer most of their HD content to stand-alone devices, and then hide behind the excuse that this is due to 'licensing issues,' implying that it's just too easy to pirate content off a HTPC. Of course, the reality is that they're receiving kickbacks to 'push' new devices to consumers; after all, when an enthusiast goes out and builds their own HTPC, nobody earns any inflated profits off the branding royalties! It's particularly insufferable with Amazon, as they limit the most of their content to stand-alone devices --- the very same devices that, of course, Amazon themselves just happen to sell. Beyond quality issues, the real dark cloud on the horizon is huge vertically-integrated corporations trying to squeeze out HTPCs altogether, in favor of 'monopolizing' all content to their own hardware.