So theoretically I could get a SuperSlim and take the 60Gb drive out of my old Phat PS3 and put it in it? Do I need this HDD rack or whatever its called?

To be honest, I don't play many games at all. Use it to watch Blurays and my son got Skylanders for Xmas and he misses playing that on it....so at most there is like 2 games being played on it in any given week.

Also seeing as the 12Gb version is a SSD how does this show up in the XMB? Is it shown as separate drives or not?

I did look into fixing it, but to be honest the time involved and getting the space to do it as well as buying a heat gun, just put me off doing it.  Also I think repair shops are charging £50+ to repair it and it could just go again.  So reckon its better all round to get a new one or a preowned with a 12 month warranty to cover it.

It is simple to fix the YLOD. Use a hairdryer and blow hot air into the back of the PS3 for about 25 minutes then blow cold air for about 15. Voila, the PS3 will work as good as new. My PS3, purchased on launch day in Europe still works perfectly.