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BenKenobi88 said:
Why would backward compat. have to leave? If it's software only on the newer versions, why should this be any different? I wouldn't think that would be costly.

EDIT: Oh. This quote is from a Microsoft exec. Why do we care then?

 From my understanding, the PS3 still has the Reality Synthesizer GPU from the PS2. So the theory behind the 40GB PS3 is that it wouldn't have the Emotion Engine or the Reality Synthesizer to save money, but even it they took out Wifi, card reader, the RS, and threw in a 40GB hard drive, it wouldn't make up the difference in cost between an 60GB PS3 at $500 and a 40GB unit at $400.