There is also people who has 4:3 TVs that will not be able to display widescreen videos properly.

And imagine the 'Why is that my Astro isn't fullscreen', 'why my astro has black bars' et. al. complaints Astro will receive. 4:3 for SD while widescreen for HD is a good compromise for everyone.

For that particular channel, not exactly very many though. I imagine that would be not the case though if they do so with channels that does not have HD equivalents like TV3.
From my own sources, if being given the choice to choose, majority of the Astro subscribers did not want to switch their decoder from the grey-type decoders like Philips/Nokia to HD ones from Pace or Samsung.