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Ruler said:

http://www.legitreviews.com/leadtek-pxvc1100-mpeg-2h-264-transcoding-card_1134

it has H.264 like you mentioned above, its easy to make a software update for it.

RSX is a Gefore 7800 while the jaguar GPU is an AMD 7850-7870. The Cell CPU worked a lot in a way like a GPU, it would be perfect for being a third Physx CPU rendering extra stuff like particles. Look at games like MGS4 or the Last of US and tell me they look like junk? 

Besides has Sony enough man power from studios who could implement extra graphics effects, Nvidia is doing the same so Sony could do that easily for the next AAA game coming out.

The Cell BE does NOT have hardware acceleration for H.264, it is the SpursEngine that DOES have H.264 acceleration ... (Big Difference!) 

Just because GeForce 7800 is some old turd doesn't mean it is a known subset of GCN and using the Cell BE for physics simulation would have drawbacks such as synchronization overheads and other caveats of the Cell ...

How the games look like mean nothing to me when developers left and right claim Cell to be junk ... 

Even with all the man power there's no way to know if they could even translate it to graphical effects ...