Has sony said anything about making it smaller?   and if so when would that be released?

 Speculation is welcome as well.

No. And they won't, until the day before it comes out. But they probably won't get a slim out until 2010 at the earliest.

 They revealed the PS2 Slim 2 months before it was released I believe.

Probably will come out for holiday '09 is my guess/ 

I would say Christmas '09 at the latest.

I think they need it earlier than that. Next year would be my guess as the Wii is ever sailing into the distance. If Sony wants to take on Nintendo and not head for second best then they need it by xmas 09.

Why won't they announce till it's about to ship?  I thought Sony promised things way ahead of time and that was some kinda problem?  Which is it?

I mean, theoretically it would be harder to slim PS3 down because its power supply is inside the body rather than some toaster oven thing sitting next to the box, and PS3 has a large fan/cooling system that is really quiet and actually works (and Sony probably won't go with a solution that doesn't work), and the baller ass Blu-Ray drive might be harder to shrink down than a mere DVD 9 drive, but then again since Sony is better at hardware design, I definitely think they'll bring a slim in '09 if MS does.  Cell and RSX are soon to be both at 65nm, and they've got 45nm Cells on the way after that.

And Sony won't have to pay IBM to test their hardware. 

Once the chips are 45nm the power consumption will be below 90 watts and low enough to allow them to shrink the power supply and simplify the cooling system.
The motherboard will be redesigned with higher integration levels to make it smaller.
The Blu-ray drive takes no more room than a DVD drive in fact it can be made even smaller than a DVD drive since it does not need to spin as fast and so can use smaller motors.
It will eventually be just a little bigger than the slim ps2 - i think it will allways keep the big radial fan - this fan is so quiet and smooth.
Weight will be under 1 Kg the high weight of the current unit is partly due to the heat pipe cooling system it's very effective but is also expensive using special coolant, copper tubing and radiator fins.
Dont expect to see this untill 2010.

It won't be a while. When they get the 45 chip, then they can start working on decreasing the size, but I don't think we will ever get down to a slim PS2 size, as they do have an HDD to fit in there

Holiday 08 in Japan, is what they need. With a big game and sales go skyrocket, PSP has prove it that it can drive up sales in Japan really fast by just producing a smaller model. Yeah, the handheld was simply too big to handle for their tiny hands

Wasn't it the intention to drop the 45nm cell around September this year in the PS3?

Sony has to decrease the size of the cell to decrease costs, for themselves as well for buyers of course.

18 months time a new PS3 slim will be on market and PS3 price will be lower than what it is today and many PS3 exclusives will be available.