the thing about compact discs is that for the first time, the media was fully digital, the warmth that came from the analog inaccuracy which made sound seem more natural disappeared, atleast thats the speech any vinyl fan will tell you, as with headphones and speakers, as you go to higher quality sound equipment, the increse in detail makes sound less fun and more analitical,
which makes you ask, are you listening to the music or to your equipment ?
as for the physical vs vitual media, you have several factors,
1) alot of people like having the booklet, or the extra DVD, a CD signed by the artist has high emotional and/or economical value, plus, it gives you the feeling that you own something, a downloaded song is just a name on a list in your computer, nothing less, nothing more, theres a clear loss in value and satisfaction here,
2) the CD is in your house, in your hands, no one can come and say "you cant play that CD anymore" on the other hand, most online music download services dont give you music, they lend you music and a note that says "you´re allowed to listen to this song under x Conditions", which means that one day you wake up, and you find that your permisions to listen to it are gone, or that you can only listen to it on a specific device,
the CD is there, and you can wear it as a hat if you like, downloaded music isnt really there, its here today, gone tommorow,
3) then you have the album factor, i doubt theres a person one who hasnt bought an album becuase he likes 1-2 songs by the artist, poped in the album, and found he paid for 2 songs he likes, 6 he can stand and 4 he hates, ist like going to the grocery store and being forced to buy a pack with 4 apples, 6 bananas and 2 oranges when you really just wanted 1 or 2 oranges, the downloaded music breaks the hold on this tactic used by the record labels, making you buy 12 songs to get just 1-2 you want, lowering record label profits becuase they can no longer bundle bad music with good music and force you to buy it,