I think this is a great idea, just implimented wrong. Here's some thoughts:
1st, it's too expensive. $15 for a non-physical game that is actually CHEAPER from the game store is a bonehead move.
2nd, The size will limit people's ability to download more than a small handful of titles. Hopefully they will use some compression to lower the size a bit of the downloads, otherwise it'll be like the Wii and their 500MB of memory which fills up WAY too fast.
3rd, the thought of a lot of hard-to-get games is enticing to say the least, but again... $15 for what they should be charging at most $7-$10 for is just mind-blowing.
4th, The achievements are NOT that big of a deal. The games just as they are is a great service to those who can get their favorite games on their HDs when they might not be able to find a copy in stores.
5th, the DMR fiasco is what scares me. I'm still fighting this issue with my replacement 360 and have over $500 worth of downloads that are useless if I'm offline. This is the BIGGEST and one of my only complaints about the 360, which is otherwise the greatest system I've ever owned.
The bottom line is MS needs to restructure the pricing on Live (not the service, just the downloads) and the need to clear up the DMR fiasco. Otherwise, this is a great idea, and I love it. I've got the 120GB hard drive and I've only got 40GB left... so that leaves room for what, maybe 8 original xbox game downloads, considering I don't download anything else? Hmmmmm........