Video chat wihle playing a game...  that would be AMAZING!  But alas we barely have enough processing power to check my trophies while I play.

At the point of the presentation, hardware would have been finalised. The demonstration at GDC06 would have been shown on hardware that was probably 95% of what the launch hardware was, at least in functionality.

I believe video chat is confirmed for Undersiege the PSN game.

Now that i think about it, would be cool video chat not in the game but in like lobbies for online play. It IS possible.

Lobby chat would be a bit too much, like if you have 30 people in a lobby, 30 vids... not pretty.  Though still face chat with one or two people during a game would be sick.  It'll make setting up games with my friend a lot easier.

They were charging a considerable mark-up on Blu-ray players at the time.  The actual drives were near $200, I believe, with the launch of the ps3 bringing that price down even further due to economy of scale. 

And the above poster is incorrect in his thinking that "Cell was not that expensive".

The issue was that Blu-ray, Cell, and the RSX were all well over $100 each.  This was especially surprising for the RSX, given the Xenos in the 360 is slightly more capable yet cost less at the time.  Going with a specialized 256mb of XDR ram for Cell rather than the more common DDR3 (used for RSX/Xenon/Xenos/most modern computing) also came with added costs.

Sony went stupidly high end on most components, but this hasn't translated to any obvious advantage in hardware capability, thanks to most devs taking years to get to grips with Cell, and thanks to the RSX's non-unified shaders and last minute downclocked speed (550mhz > 500mhz) putting it at a disadvantage vs the Xenos.

You can still do some pretty impressive things with ps3, of course.  Many developers offload things like vertex-processing to the Cell's SPUs, making up for the RSX's shortcomings and then some, but you'll generally only see nifty tricks like this being used in games built solely for ps3, like Uncharted 2.

Though SCE did recently add Sony Santa Monica's Cell-based MLAA implementation to the Edge toolset, according to the guys at Digital Foundry, so we should start seeing that in third party games in the future, given it would supposedly only take "an afternoon of coding" to implement at this point.  We'll see what happens.

Probably becuase most people paid no attention to GDC back then lol.  I think GDC07 was the first notable GDC, but even then most people didn't realize how many important announcements were made until after the fact.

Honestly, most of these features were probably canned due to ram issues.  Sony initially had 96mb of ram reserved for the ps3's OS, a staggering amount compared to the 360's 32mb OS footprint.  Once they realized developers had an obvious advantage with 360 in this area, they started working on cutting that 96mb footprint down to something more reasonably.  Pretty soon after launch it was down to 64mb, and now it's right around 32mbs like 360.

They actually demonstrated features like in-game XMB only four months before launch, actually.

I wish most of the features had eventually made it in, and in general I prefer the look of the XMB in those to that which we have today, but I can certainly understand why some features were nixed.  Cross game video chat in particular would require a stupid amount of ram for what's actually a pretty stupid feature.