I don't think that Polaris is counting on converting many existing HD riders to Victorys. Instead, I think they are counting on tapping the upcoming generation of riders that are right now riding crotch rockets. That generation has a different idea of what a bike is supposed to be. They aren't sold on the mystique of HD. I'm betting that HD themselves will look very different in another 10-20 years to appeal to this same generation. That's why they're developing the VRod now, to be the cruiser for the folks that didn't come up saving their pennies to "upgrade" to HD.
Personally, Victory's don't quite do anything for me, but they're getting closer. I won't ever own one, but like I said, they're not planning on selling me, anyway. I can see how they would hold a lot of appeal for those who haven't "come up Harley", but are ready to slow down, sit up, and cruise while making sweet V-Twin sounds. And since Arlen Ness and S&S are both making a line of accessories and performance engine parts, the aftermarket is growing as well.
A new generation of riders and new EPA regulations should add up to a pretty different motorcycle scene on down the road.