Some quick reactions:

To have a fair discussion, you would have to look at both the problems and benefits of losing physicality. There is a danger of clinging on it to it purely for nostalgia, which I think is largely the case with books.

My hunch is that kids' imagination will actually expand with virtual worlds.

Another advantage is they will be better educated. Like my wife says, "I wish I had Google when I was a child. I wouldn't have to believe all the lies my parents told me to shut me up."

I'm not even sure we will net lose physicality. We will probably just have new types of physical objects.