After playing the BETA, your thoughts are wrong. Yes LBP2 can produce FPS, and even basic 3D games but these do not compare to modern 3D games. There are good levels in the game yes, but it will never do what you think. 

Also, the multi-player is weak. By this I mean, the biggest genre at the moment being FPS. LBP2 cannot support multi-player first person shooters. If platformers were the king genre, then maybe LBP2 will out shadow everything else but as it stands it will just stay a good game.

LittleBigPlanet 2 is going to be released next month and the possibilities of its level creation tools seem to be endless. Unlike the first game which focused on platforming, the sequel is going to be a platform for games. Players can build pretty much everything they want and replicate entire games. This sounds great at first glance, but it's actually a problem Sony doesn't seem to have put much, if any, thought into.

The big profits in the video games industry come from software sales, even moreso for a company like Sony who sells hardware at a loss early on. LBP2 has the potential to make all other games obsolete and honestly, who is going to buy other PS3 titles if he/she can buy one single game to rule them all?

LBP2 poses a threat to the entire 2011 lineup and neither Sony or third parties will be happy to see their big budget games collecting dust on store shelves. Sony would have at least the benefit of LBP2 being its own title and bringing in some cash, but third parties will have to look elsewhere to sell their games.

This is actually quite similar to the position Nintendo is already in. By dominating the software sales on its platform, third parties have little reason to make an effort. Does Sony want to become like Nintendo? I don't think so and that's why they would be better off to cancel LBP2 now.

After playing the BETA, your thoughts are wrong. Yes LBP2 can produce FPS, and even basic 3D games but these do not compare to modern 3D games. There are good levels in the game yes, but it will never do what you think. 

Also, the multi-player is weak. By this I mean, the biggest genre at the moment being FPS. LBP2 cannot support multi-player first person shooters. If platformers were the king genre, then maybe LBP2 will out shadow everything else but as it stands it will just stay a good game.