I think some knowledgeable people in the industry have said that PS2 emulation might not be possible on the PS3 because of the very different architectures. For me this would be a big issue should I decide to buy a PS3 later on at $199. I wouldn't like to keep my PS2 because of the clutter and especially because of the wired controllers.

I think They will, at least for a time.

On topic, the BC in the 80GB barely works at all as it is... http://www.us.playstation.com/Support/CompatibleStatus

Test some games here. I went through 25 of the PS2 games I own and 15 of them had major issues. If you are looking for a PS3 with backwards compatibility, you are too late...

Maybe on GDC they will announce new SKU. SO just sit and wait or buy 80GB.

@naznatips

I disagree, I have an 80gb playstation 3 system and almost every single one of my 87 ps2 games work, only about 8 had problems and they were very old games.

Also the 80gb can play nearly 90% of all ps2 games, I call that great BC. Just because your games dont work doesnt mean that the other 500-600 games out there will not work either.

 I think it's much like Rocketpig said in an early thread (and I'm sure I've said in many before today).  Sony had the 40GB ready, but they were working on software emulation for it before they wanted to release it.  But sales were a bit weak, and costs a bit too high so they were forced by MS and Nintendo to come out with a lower cost system.   For the time being that would mean no BC for PS2 on the 40gb sku's.   And if they really are eliminating the 80gb and having no hardware based emulation in a PS3, I think they are closer then I expected them to be in having total software emulation in the PS3.   I thought the earliest would be late 2008 when they would release a patch that would make it software emulation on all the units without the hardware.   In fact, I think sony wasn't too far off.  They may have had software emulation support for up to 50% of PS2 games ironed out, but that's far too low of a number to push that out and announce it as it's a large number of games that won't work... Expect it to come out when it's at minimum 80% support and most likely 90% support. 

I guess I'll be ebaying for a 60GB when the time comes to get a PS3 ...

This i think is my only problem with sony this gen, that they totally f'ed up BC.

You guys really seem to want BC, but i don't think it matters so for the low cost of $1000, i will sell you my 60gb PS3