If you're not using Video on Demand you don't need an internet connection (BTW E* has the same requirement for their VoD service).
Yea, as I said most folks aren't wired with cat5/6 to each room from a central spot. That's the same as most folks don't have a coax run from their living room to their bed room so they can use the TV2 solution either. At least with D*'s MVR solution you can use wireless or their powerline adapters if you don't have a wired network in place already.
And as I mentioned, you'll be able to watch HD content in HD on the other sets, E*'s solution can't do that. As HDTV's end up in more and more rooms (I have 4 at the moment) people are going to watch to watch content in HD, not SD.