In my opinion you are correct to advocate continued use of microfilm for 
the long term retention of thesis.  I might, however, suggest a possible 
compromise.  

Look into the possibility of creating the microfilm directly from the 
electronic file.  Using computer output microfilm (COM) would allow you to 
ensure a viable long term retention of the records without the need to 
print, film and store paper copies.

You wouldn't even necessarily have to do the work yourself.  The 
organization I work for is currently having an outside vendor create 
microfilm for us from the electronic document copies in our database.  We 
simply group the files the way we want them to appear on the film and send 
them a cd or dvd with the data and they send us back completed rolls of 
microfilm.

I would also suggest checking, if you are a state funded institution to 
see, what requirements your state archives has set.  

Good luck.

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