I am a fan of the PS3, but I don't like this decision either. Some of us would like to play our PS2 games on our HDTV's, the PS3 upscales a lot of them quite nicely.
I'm glad I got an 80gb that does this, but I would be pissed if I was still wanting to buy one and had to go pay way to much on ebay to get the upscaling.
I hope they realize the mistake and put out a sku that has BC.