I think some of you such as Twesterm may be over analyzing it a little bit. If you want to watch your movie in full 1080p, then use your PS3 and a 1080p TV. I believe the main idea of this is to add another feature to the connectivity of the PS3 and PSP and not to take away from watching movies on an HDTV compared to a tiny PSP screen.
For example (if I had a PSP of course), I think it would be pretty cool to be able to not only have stuff stored on the PSP, but also be able to connect to my PS3 at my apartment and maybe even watch a movie between classes (or copy a movie over prior for use on campus).... That would be a welcome feature by me especially with the new semester where I have to wait an hour to an hour and a half just for a fifty minute class. Now I'm not going to only do that with movies since we have a 720p/1080i TV at my apartment (even if it is crappy) and a 1080p at home, but I think it would be a plus to still watch a movie on my PSP if I wasn't home or at my apartment.
Now the main problem I see is the price of Blu-Ray movies. I'm hardly a big movie buff with a small movie collection and I'd only rent or barrow anything I'd really want to see. If my family gets netflix or the local brick and motor place near home starts renting blu-rays, things could be interesting.
