Well, 2 months ago I would have agreed. But since both have become available, HD-DVD has already proven to be superior in picture quality. Reason is the codec they are both using. HD-DVD is using VC-1, but for some reason, even though blu-ray supports VC-1, they are still using MPEG2 compression. End result is blu-ray ends up with an inferior picture.
Secondly, Sony lost their biggest supporter this month, Pioneer. Pioneer said that they were blu-ray only, but after seeing Sony's financial report and the sales of blu-ray vs HD-DVD, they opted to also join the HD-DVD front. Their new player will be out very soon.
Third is the Sony investors. They are calling for Sony to drop the format, and go back to being the "fun" Sony. Some major players have threatened to pull out completely. Sony has not pulled a profit in 6 years.
Fourth, Sony has never won a format war. You have Beta, MiniDisc, SACD, UMD, Atrax3, MemoryStick. This list continues, all that is shown by Sony is failure in these regards. With blu-ray, it is already following the same patterns as the previous attempts.
If you want more background information, check out the latest Wired magazine. It goes into more depth about everything. Problem is, Sony has bet the farm. If blu-ray fails, then Sony goes under.