Well, if PC gaming survives this, it will be much better in the long run. By cutting backwards compatability, both games and graphics cards can advance in leaps never seen before. Part of what keeps technology from advancing is the issue of backwards compatability. Without backwards support for DX9 and earlier, DX10 will be extremely fast and efficient.
Im not looking forward to the transition, but I am looking forward to the long term results. That is, if PC gaming survives.
And no, DX10 will not install on XP. Microsoft is also doing this to try to push migration to Windows Vista at a much faster rate than Windows XP. Windows XP adoption was EXTREMELY slow, which is why every program you get now is backwards compatable all the way to Windows 98SE.