I have an understanding with family and friends. When someone upgrades a VHS to DVD, we pass the VHS to someone who would really enjoy it.
Examples:
My parents upgraded The Burbs and Buckaroo Bonzai to DVD and gave me their VHS tapes.
I upgraded X-Men to DVD and gave the VHS to my sister.
My sister upgraded Se7en and Pulp Fiction to DVD and gave me her VHSes.
I upgraded Se7en and Pulp Fiction, gave Se7en to a friend who has never seen it before and gave Pulp Fiction to a friend who loves the movie, yet doesn't own it.
So I don't think my VHS collection will ever die completely, since a lot of them are hand-me-downs, bought from Hollywood Video's VHS clearance sale, or just movies I don't care enough to get the DVD of.
I have about 200 VHS movies at home and I don't plan on getting rid of any of them. The picture is just as good as any dvd I get and the movies are ridiculously cheap now. I went into hollywood video last weak and picked up 10 movies for $10. Plus I usually don't look at all of the special features or commentaries except for all of the huge action adventure type movies like Star wars and POTC.