It seems confirmed now that the "Other OS" support in the new iteration of the PS3 has been cut to keep down costs.

I had heard rumours that the reason was that Sony had to pay IBM a licence for the use of the hypervisor - that is, the virtualization software - used to run alternative OSs on the PS3. But the sort-of-official explanation seems to be even simpler: the hypervisor software has to be kept up-to-date with hardware revisions and it simply was not high enough a priority to justify future expenses.

Here's a link with the explanation by someone who I understand has an official role in SCE.

The silver lining comes from another quote:

Please be assured that SCE is committed to continue
the support for previously sold models that have the
“Install Other OS” feature and that this feature will
not be disabled in future firmware releases.

-Geoff

All in all, I'm glad to be the owner of a fat model, as I like to run emulators on my PS3 Linux installation. I wonder if Sony thought of the idea of developing the hypervisor as a commercial, downloadable product and allow future owners of slim models to buy it for a reasonable price.

Makes a lot of sense. Encouraging people to buy PS3s for purposes other than playing PS3 games would make sense if Sony was making a profit off hardware, but they need to sell PS3 games to make money. It's not doing Sony any good to sell a PS3 for people to use as an emulator or to tinker around with their own little Cell cluster.

I'm sure it will be made available, but not so sure it will be to the mass market.

I think if they do that, there will still a small percentage of those in scientific/research etc. fields that will will use PS3 clusters for world domination projects or whatever, similar to a devkit licensing type of deal I'd imagine.