I'm willing to watch a few ads to see a movie free. This is great for films not available on Blu-Ray.

Will this happen on a spin-off site named 'themtube.com'?

Yes you can find DVD ripped versions on pirate bay...and even watch them after a couple of hours to several days depending on how many seeds there are. With this youtube service I can find and watch a movie instantly ( or reasonably quickly). And putting up with advertising? I put up with advertising already when I watch regular TV. 

Sometimes I just want to watch a movie quickly without making it a process (get disc, turn on components, insert disc...), so Hulu and youtube and Netflix Instant View are fine for me.

Let me guess : this "legal" download will be riddled with DRM anyway, and the fact that it is bloated with additional ads will not make it less expensive, now will it ?
Remind me exactly how long it takes to find a proper, free and DRM-free DVD version for download on Pirate Bay ? Without ads or annoying previews ?
Frankly, I'm not the kind who downloads films. I'm a packrat and and I like to see my movie collection in front of me - that means boxes and cover art.
I buy my DVDs, and my games. I'm stupid like that (no kidding, I've been told so), but on the other hand I don't have to worry about film quality or ads or anything else that the MAFIAA can try to impose.
It's my house, my player, my TV, bud. I'll do whatever I please with this film I bought whether you like it or not. And I will NOT fall prey to your despicable DRM tactics.
Keep your ad-laden crap to yourself.