Hard Drive improves next gen games, so HD is way more important. It allows you to download plenty of add-on game content, it allows you to download full games, it can help make your disc games to load faster, large graphical game assets can be installed onto the HD so developers can do things graphically that wouldn't be possible otherwise. You can also store movies and other media on the HD. I put all of Rome on my PS3 so that I could enjoy the show on my 46" HDTV while lying back on a comfy couch. Then when I went on trips, I transferred some episodes to my PSP. So the HD is crucial for me, while not being able to play PS2 is something i can get around by keeping my PS2.
My Top 5:
Shadow of the Colossus, Metal Gear Solid 3, Shenmue, Skies of Arcadia, Chrono Trigger
My 2 nex-gen systems: PS3 
and Wii 
Prediction Aug '08: We see the PSP2 released fall '09. Graphically, it's basically the same as the current system. UMD drive ditched and replaced by 4-8gb on board flash memory. Other upgrades: 2nd analog nub, touchscreen, blutooth, motion sensor. Design: Flip-style or slider. Size: Think Iphone. Cost: $199. Will be profitable on day 1.
