Nighthawk:
I wouldn't recommend anyone replacing all their DVDs. I certainly have not done so. Gotta have more money than I have to do that. Out of the nearly 1,000 DVDs I have, I'd guess I've upgraded less than 25 of them to Blu-ray. I did however quit purchasing DVDs, almost immediately. Same as when wide screen came out on DVD - immediately stopped purchasing 4:3 format even though I didn't yet have a 16:9 TV.
I also can't afford $25+ a pop for movies. Guess we each have our own threshold. It's got to be a movie I really want in HD before I'll pay more than $17-20. We quit going to theaters when they introduced commercials in them, so that budget goes toward our movies also. Beside which, the 2 of us can't go to a Saturday matinee for less than about $13 (without spending a dime at the snack bar) any more. My HD disc collection is probably only in the 200 range (that's over the last 5-6 years or so) and last time I figured it out, I was averaging about $13 per disc and now I own it instead of a one time viewing in the theater. You have to be willing to wait for most movies awhile if you want to do that, but there are plenty of places between Amazon, Warner Brothers, etc. that put Blu-rays on sale.
If you don't have an HDTV, the only good reason to get a B-R player is so that you can begin the switch over for new purchases. Eventually, that TV is going to break down and you will have a HDTV. Have one friend that purchased one of my old HDTVs and doesn't have a B-R player. He only purchases movies that are combo B-R/DVD until he gets a player.
Personally, I'v been recommending the upgrade to HDTV for about 4 years now to anyone that is into movies, football, basketball (you just won't believe how much better basketball is in 1080 - omg - and you'll wonder how you ever watched on that other TV). And I had a couple of the best analog sets money could buy when I transitioned.
I'd probably recommend a dedicated Blu-ray player than a Blu-ray drive attached to your iMac, unless it's sitting next to the TV and you're already using it (or plan to use it) as a HTPC. This player does bring the Mac into the realm of being a HTPC. A HTPC that can't play Blu-ray, imho, is not a HTPC at all.