They actually did that with Unreal Tournament 2003 and maybe 2004 as well. The idea never caught on. Probably because DVDs are slow and you cannot save your progress.
Maybe that is why Tim Sweeney hates Linux. He got a trauma from that.
And in DOS times games often came with a utility to create a boot-disc. A floppy that loads only what is needed to run the game to save RAM.