Digital distribution like Steam have the infrastructure built for it.
The entry fee for independent and smaller devs to Steam is way way lower
than all the licensing crap that Microsoft offers with their XBLA, and for
the larger companies, it costs next to nothing to host it digitally as
opposed to the brick-and-mortar packaging (especially when the game
requires Steam and you essential buy a CD key at the retail store, with
added taxes, etc....)
Besides, those console games are marked up to hell so I bet they make a
pretty penny for brick-and-mortar sales.
I doubt MS will try a full-blown Steam-like console digital distribution.