I think that the lacking HDD support (think of Xbox I) on consoles was one of the major reasons to use streaming. The benefit of streaming is not only the reduced memory impact, but although the asynchroniously nature. Time isn't the most critical issue once you start streaming.
I can't imagine they stream them from the DVD
Why not, when using DDS you can access the single mipmap levels easy enough. And you don't need to read every single mipmap-level, dividing your texture mipmaps into two sections (low/hi) is often enough.
(i.e. one texture file with all the MIP levels in it)
Loading and decompression can be done in an async. thread. Uploading the data to the videocard is most likely done by DMA, therefore the time impact could be quite small.
So if they are separate, isn't it going to be pretty slow to load in an image, lock the texture on the card,