Oh, I'll readily admit that I'm painting in pretty broad strokes. Each of those paragraphs could stand to be a whole, in depth conversation.
As for archiving stuff digitally, whether they're along the lines of family heirlooms or more "official" stuff like legal records for businesses and such, I remember reading an article years and years ago about people wringing their hands and pulling their hair trying to figure out the way to back stuff up. There were all of these issues of not only competing types of media, but competing file formats, codecs, software, and operating systems and the whole struggle of trying to figure out what to do with ever changing formats, dying formats, and incompatibility. I think finally, we're we'll pass that in so many ways. Partly because standards have condensed, for instance digital cameras mostly use SD cards these days, instead of SD versus xD, versus Pro Duo, versus Compact Flash, but also because so many different programs can read more than one type of file and one type of file can be opened by so many different programs. Not only that, but even compare to a decade ago, storage space is so cheap today. That was the hard stuff, and now that's out of the way, like you're saying, more practical concerns like file quality, bit rot, and ease of access are really what we mostly have to be concerned with tackling.
Edit: Speaking of backing stuff up, I heard a member of this organization give an interview on the radio one time and while I think what they're doing isn't all that practical, listening to him talk was interesting because intentionally or not, his ideas and his projects were very philosophical in terms of why we desire so step fly to preserve knowledge and the lengths we're willing to go to do it.