Given a dvd is about 4 to 5 gigabytes, what is a blu ray? I think downloading blu ray movies would soon fill up your hard drive. Looking at google on the subject, movies are typically 20-35 gigabytes of data. i don't think I would be keen to have that on my system - stick to discs.
As for setting it all up, on my system here, I have an LG blu ray drive (75 quid a year ago I think), Cyberlink power dvd 10 to run it & an HDMI cable to hook it up to the 1080p tv, so you would be good to go with a similar set up.
I recommend it, I think blu ray is an order of magnitude better than dvd for watching movies.