The format war for all intensive purposes is over, and Blu-ray has won. They have the most studio support now, which is key.
I have owned both. I bought a Toshiba HD-XA1 player the day HD-DVD players were released. The picture and sound quality was amazing, and the player did a fantastic job of upconverting SD DVD's. My biggest gripe was the agonizingly long load times and the flakeyness of the player. I had nothing but problems, with skips and lockups when viewing HD DVD's from Netflix that were lightly to moderately scratched. I even had skipping problems (though, to a much lower extent) with brand new out of the package HD-DVD's. But, I kept on, and was a firm supporter of HD-DVD, until Warner made the switch to Blu-Ray. I knew, that was the nail in the coffin for HD-DVD.
So, I bought a PS3 and could NOT be any happier. Blu-rays start playing in about 10-15 seconds, (compared to the 2+ minutes my HD-DVD player) which is wonderful. But, the real kicker for me was I have had absolutely NO skips, locks, etc whatsoever on the PS3. It plays all discs flawlessly. The coating on Blu-ray discs is extremely scratch resistant, so Netflix movies come to me in great condition, other than fingerprints which easily clean off.
Blu-ray seems much more consistent in picture quality to me over HD-DVD. Though, I would give my HD-DVD player a slight edge over the PS3 as far as upconverting SD DVD's.
The PS3 for a Blu-ray player is fantastic and has so much more capabilities then just a Blu-ray player and game console.
I started watching Lost: Season 3 on Blu-ray this weekend, and the picture is absolutely amazing. It is by far the BEST picture quality I have ever seen on my TV. I truly does look like you are looking out a window, not a TV.