Either way does it really matter? If DVD was that limiting, Microsoft would have offered the blu-ray years ago. I don't think it's really an issue for gaming.
Microsoft actually did have a HD-DVD addon, but because it didn't ship as standard they can't use it for games. Consoles have set hardware, it isn't *allowed* to change. That's the whole point.
7GB is quickly becoming very limiting, it's just not enough data. On PC we're still in the area between "It's enough" and "Oh god we need more" because with stronger processors and install-time decompression you can fit more in, but on console, where things have to be decompressed on the fly, it's well past time for larger mediums.