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I'm sorry for your loss.  I'm not sure what I would do.  I've had my 60GB PS3 since launch and it is still kicking.  As far as I know though, they have to try and repair your specific system unless they otherwise let you know that it is beyond repair.

This is what I have heard/read though, and I would want to spend as little as I possibly could, in order to save more money for games.