greenmedic88 on 19 July 2008
A smaller install is always preferable, although without transferring game or code resources to HDD, it shouldn't make a significant difference.
Large installs are mainly an initial inconvenience that -should- result in better game performance/playback, although if a game is not a load intensive game (only between long levels for example) and doesn't support texture streaming, the inconvenience really doesn't offset the benefits.
And yes, presumably those who opt for larger HDDs in their PS3s are not doing so to allow them to install more games but rather to allow for more demos, more additional content, videos and PSN store purchases, media files, etc.
If I heard the former, it would be a first.
