I'll never use the service despite being their EXACT target demo, and that's a bad sign.
If your requirements are that it be that cheap, then no, you're not the target demographic. XBox Live's video download service has been plenty successful thus far, and they have been charging quite a bit per rental ($5+ for HD, if I recall correctly). I'd say you're a bit too savvy/stingy to fit their target exactly. The truth is, from what I can tell, changing the video marketplace to feature the Zune logo and adding more shows and movies is all that is occurring here; I highly doubt that the pricing will be altered much, if at all, from the current rates. But that's just my speculation; we'll have to see what Microsoft does this fall.