I guess mpeg2 on a blu ray would be possible since the players can read standard dvds. I wonder though if they are only programmed for either HD specs on Blu-ray or SD specs on DVD though.
The BD spec includes both SD resolutions and MPEG2 compression. BD players are required to support SD and MPEG2 on BD, and as Adam pointed out, MPEG2 compressed SD video already exists on some BD releases in the form of extras.
I wouldn't be surprised if BD takes over in the next 5 years.
It can't. Every BD player can play DVD, which means that every BD player counts as a DVD player as well. Thus as long as there's one other working device in the world that can play DVD, but not BD, then the number of devices that can play DVD will always exceed the number of those that can play DVD.
Because 10 years from now we'll be looking at another format.
I'm not sure what a disc format 10 years from now will be able to offer above BD that will make it marketable. BD already supports 1080p, which is going to be the max resolution for a while now thanks to ATSC standards, and lossless audio. Online digital delivery may take over, but not another disc format.
I think the idea was that if BD does take over DVD and they stop making DVD. Though they may be able to co-exist, if just for the SD/HD factor, the "what if" remains. What if studios decide to release only BD? Will they then release BD discs with nothing but SD content?
Even if DVD players/recorders are completely discontinued from being manufactured, you'll still see a market for DVD discs. Since every BD player can play DVD, it doesn't hurt them on a market level to release SD-only content on DVD only. In fact, it can only help them, since as I illustrated above, the number of devices that can play DVD will almost always exceed the number of BD players.