will there be a collapse in processor prices

Some companies (like Anthem) offer an HDMI upgrade on their pre/pro's (although at the moment only to 1.2), that would allow their equipment to remain competitive (for a price.)

On the other hand many people send HDMI directly to their display and use coax or toslink to the pre/pro for audio, to them HDMI may not be important.

What you say may become true if and when the new audio formats (like Dolby TrueHD) become more prevalent and the only way to get them is with HDMI. This may not be a good thing but we probably don't have a choice.

yup... obsolescence. Worthless. Just like Elcassette, Laserdisc, 78rpm shellac, and eight track tapes, worthless.
That's what happens. If you bought an audio product because it was an investment, that is foolish.
Recently, at a local retailer, a $4,500. Farouja type processor was on sale used for $250.
That means it is eclipsed totally. Usless junk in a current system.

HDMI is necessary for some DVD players to pass a HD-DVD sound signal. The new Toshiba HD players can only pass this via decoded PCM data through HDMI. If I used my HD-A1's optical output HD-DVD audio would not be possible.
The Sony PlayStation 3 passes SACD already decoded through HDMI using PCM.
IMHO it would be a waste to spend money on any processor that doesn't support HDMI 1.2 minimum.
I purchased a new Pioneer Elite receiver and use an external amp. This combination is really nice. Most of the new $800+ receivers have HDMI, upsample video and have preamp out puts.