From what I have gathered (isn't Google awesome ), Blue ray will not be backward compatible since it is entirely different technology-and as you said, it uses blue laser instead of red which current DVD player use.

But HD-DVD will be backward compatible: you won't be able to play HD discs on your existing DVD player, but you will be able to play your DVDs on your new HD-DVD player.

From the look of it, HD-DVD might win the first battle of this HD format war. It is cheaper to make, and backward compatible.
But blue ray format have an ace in hole with its larger storage capability (up to 200 GB).