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So basically you think software emulation was planned to be released at the same time as the 40 GB, but the need for higher sales caused them to release the 40GB model early.

I suppose it's possible.

"right now is a knee-jerk reaction by Sony to right the ship in hopes that it will carry them into the era when software BC is available for all PS3s"

What exactly is a knee jerk reaction? The release of the 40GB?

When the 40GB was released, it was released with a lot of planning. Marketing strategy, advertising etc. Everything was prepared. As for 'righting the ship', it seems to have done just that. PS3 sales have picked up, and the 40GB has been widely accepted by consumers.