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1: Yes.  If you let your brother play your PS3, you could convince him to rent games every once in a while.  That way he'd have a console to play rented games on, and you'd have a nice flow of new rented games showing up at your house.  Win/win.

2: Yes.  Final Fantasy 7 is for noobs.  Let her play it.

3: No.  You did the right thing.

Overall: Yes.