This is also what pushed me to get a PS3 later in its lifetime : getting a game console, CD player and DVD + Blu-Ray player all in one box was pretty convenient.
This is also what pushed a lot of people to get the PS3 earlier in its lifetime!
Sure, it wasn't cheap at launch and it marked a leap in console prices compared to previous generations, but it was around the same price as a standalone Blu-ray player as those were just coming to market.
So at that point, why not get the more capable console?
To be fair on a technical scale, Blu-ray was the superior format so losing HD-DVD wasn't the biggest loss. I appreciate what Toshiba was trying to do but it also felt like they were trying to cut-off the competition with a lower quality but cheaper product.
audio CDs use a different wavelength for the laser (infra red) while PS game disks are BluRay (blue laser).
Of course, 99.9% of other BluRay players will also support DVD/CD, so yeah it still does seem silly.
I also remember my Dad’s disappointment when he put a standard DVD in our Wii back in the day. Those are literally the same physical format as wii disks.
That was the unfortunate side of licensing fees. The Wii has all the hardware to play DVD, there is homebrew of it, but if you want to do it the legal way Nintendo would have to pay.
Also I don't think Nintendo wanted to turn the Wii into a cheap commodity DVD player, they make most of their money on the games. It is a shame because the Wii was one of the most TV friendly interfaces and inputs, at least when the Wiimote wasn't being throw at the screen.