@ naznatips
I don't think the purpose of this discussion is to convince you to get a high definition player to compliment your HDTV. Sure some PS2 games are great, I never owned a PS2 myself, but I bought Ape Escape 2, Jak 3 and God of War and they look and play well! 
It's really all down to personal preferences. Do you want to spend more on higher quality or not? With the PS3 you get a Blu-Ray player included, I see this as an advantage, IMO it would not have made much sense to leave out Blu-Ray movie playback when adding a Blu-Ray drive.
DVDs upscaled are far less detailed than native 1080p movie content, Blu-Ray downscaled to 720p also looks miles more detailed than 480p upscaled to 720p. DVD upscaled vs Blu-Ray downscaled:
Upscaled 480p => 720p (XBox 360, one of the worst upscaling DVD players)
http://members.shaw.ca/VTXtreme/XBOXIA2.jpg
480p DVD, before PS3 DVD upscaling update, it should have looked like this:
http://members.shaw.ca/VTXtreme/PS3IASD1.jpg
Upscaled 480p => 720p (normal dedicated DVD upscaling player)
http://members.shaw.ca/VTXtreme/iceageSD.jpg
Downscaled 1080p => 720p (Blu-Ray)
http://members.shaw.ca/VTXtreme/iceageBR.jpg
IMO, for games high definition is more useful than with regard to movies as the content is interactive and you'll have a further line of sight, being able to better distinguish enemies further away.
Comparison (Ratchet and Clank series):
PS3:
Screenshots:
http://media.ps3.ign.com/media/819/819456/imgs_1.html
PS2:
http://media.ps2.ign.com/media/655/655717/imgs_1.html
PS3 videos:
http://www.gametrailers.com/umwatcher.php?id=66126 (stops at 2/3 of the footage, but the Boss battle can be viewed at the following link below)
http://www.gametrailers.com/umwatcher.php?id=66064
As I have a choice I prefer Blu-Ray movies over DVDs and I prefer to get the PS3 version of Ratchet and Clank instead of the PS2 versions.
