Does anyone know if SONY is working on getting their hardware capable of full emulation of previous titles yet? With all the success virtual console is seeing, and Microsoft working on their own version, do you think Sony will hop on board? Or would the entirety of the PS1 and 2 libraries be a bit too much to feed on?

I know that the last firmware had some emulation. Others could play some PS2 games that they could not before on it.

Well I ask because the 40 gig will not READ ps2 disks right? If they were to make them downloadable games, could the PS3 hardware run them? Would they have to change some of the specs? I'm just trying to immagine downloading some of the classic PS2 games I could never really get a hold of for like 15-20 bucks.  Maybe some of the PS1 classics as well for like 10.

Sony's goal for PS2 emulation in the PAL regions is 90% by years end. They are somewhere around 85% a the moment. No idea about the NA emulation. The PS1 emulation is close to 100% as far as I am aware.

Support for PS1 games on the PSN store depends on which region you are in. Japan has over 100 games while EU has about 10.

Ahhh cool cool :) I really hope they do a PSN re-vamp if they start to dump titles into it though, the setup they have at the moment isn't exactly great for mass content.