You say that it's "still not spontaneous and performance based", but that's only recorded music, which obviously by definition is fixed. There's still plenty of live music out there, and still plenty of bands doing creative and spontaneous stuff live. In an artistic sense I don't think downloading has hindered music at all, just maybe the packaging.
It seems that it is the delivery of music, the format in which the listener recieves it, that we really categorizing here. The end product is always a sound, but its source might have historically varied. Originally, of course, music was exclusivly a performance art. When music was first recorded, the quality was prohibitivly low, and recordings of music were only to preserve the live experience. Now, the recorded sound has become the default state of music, and the live performance is secondary. This is rooted in the production, but becomes problematic because most of the world believes that it is natural. This is, I think, what is leaving Kenneth so disenchanted. Often no more than one album out of a band's entire discography is devoted to representing a live show. Most people have only ever seen a small percentage of the artists they listen to, even those they call their favorites.
You've all seen bands perform their songs a little differently on stage than they do on the album. A young friend of mine saw this and told me "they played it wrong."
I think that we may be confusing the delivery with the default state. The physicality of music that we are talking about is, I believe, not a change in the medium or even in its format, but simply a pairing of music with visual art. One might call this simply good marketing.
But I'm not opposed to this pairing--without it I would never have discovered Opeth. I chanced upon Still Life in the CD rack of a Hot Topic, no less, and bought it spontaneously because of the cover art. That said, I don't think that this pairing has to go because of the digitization of music--visual art is equally digitizable, and itunes seems to be the only one who know this. While not perfect, their library display is the most natural and the player in general shows the most commitment to album art. I'm still undecided though...
I guess I tell you that to say that I am not necessarily opposed to the digitization (real word?) of music, it's the simple act of recording it that has changed our perceptions of its default state. And I'm not convinced that that's bad until live shows stop all together, which they can't for business reasons.