I've noted for a while that the biggest thorn in the side of the PS3 is actually the PS2.

 No, the Ps2 is competing against X360, Wii and Ps3. If the Ps2 hadn't been, people who bought it would probably have bought Wii, X360 or Ps3, so it is competing with it.

It's gen is over. Accept it. It hurting the PS3 yes, but Sony still makes money off of it. Just call it the PS3's annoying older brother. 

The PS3 is still competing with the PS2.  And it will be until Sony finally drops the PS2.  The problem is that it gives Joe Shmoe consumer a choice.  That's competition.  "Why should I buy the PS3 for $500 when I can get the PS2 for $130 and that has tons and tons of games already."

It was annoying that Nintendo and Microsoft killed the GameCube and Xbox when their new systems came out, but by doing so, they made sure that consumers only had these new machines to choose from. 

I'm not saying Sony isn't making money on the PS2, because they are, but if they want the PS3 to fare better on the market, they should axe the PS2 and stop giving consumers a choice.  Ridiculous to say that the PS2 and PS3 don't compete with each other.  If they're both on the market for sale, they are definitly competing.

the ps2 is actually a option for those wiiling to enjoy the games sony offers but don´t wanna pay the new gen prices. Even the $250 for a wii is high if compared with a $129 for a ps2. So probably the people buying ps2 are preocupied with price. they wouldn´t care to buy a nextgen console just yet. And the ps3 is pulling excellent numbers for it price. the x360 is the same price as wii and yet behind in sales. The ps3 expensive console already sold 1,5 mln units over x360 this year, so the x360 only reason for being ahead is the early launch. When the ps3 becames reasonably priced( $370 for the top SKu and $299 for the lowest) then the sales will skyrocket.

I'm not sure sales will ever skyrocket for the PS3.  For one thing, Sony has said that they won't, and really can't drop the price of the PS3 any more because they'll lose too much more money.  For another, price drops never create long-term effects.  Only short-term jumps in sales.  Sales spikes from price drops only last about a month or two, roughly the same as when console-exclusive killer apps are released.  Neither create long-term trends.

If the PS3 has only sold 1.5 million more units than the Xbox360 for this whole year so far, it's going to take another two years at least for it to catch up to the Xbox360--and only if the Xbox360 doesn't see sales spikes of it's own through upcoming price drops or killer app exclusives like Gears of War 2.  Sure, we can congratulate Sony on it's increased sales, but it's momentum doesn't seem to be enough to effectively topple or, in the near future, even strictly challenge the Xbox360.  After all, the X360 had a surge with the 20-gig Pro model's price drop, and will likely see another surge in September when the Arcade (and perhaps other models) drop further.  Microsoft is now making money with the Xbox360, so they're in a much safer place to drop prices than Sony is.

On top of which, the PS3 still has the smallest amount of 3rd party support and exclusive titles.  It could really turn around and be headed to completely own this generation, but we don't need a magic 8-Ball to see that in that case, "all signs point to no."  Too much damage was done to the PS3 early on, it's price is still the highest, it's killer apps have all failed to meet expectations (except for MGS4), and it's still losing exclusive titles.  If and when it does pass the Xbox360, it won't be by a very large margin.  Think more like the levels of the original Xbox and GameCube.  Currently, the PS3 is the GameCube.

I will agree, though, that for it's ridiculously high price, the PS3 is selling pretty well.  Far better than other lofty-priced machines of the past such as the Neo-Geo AES and the Panasonic 3DO.  It's still not selling well enough to be even remotely on it's way to conquering this generation.

As I said Sony threw an axe in consumer spending. They threw the concentrated funds to next gen systems off course as only Sony knows how. All in the name of making more money. The PS2 gave "Joe Schmoe" a chance when the PS2 dropped to $199 during the PS2's lifetime and caused 60% or more of the purchases after the first three years. Understand that. Microsoft let go of the Gamecube and the Xbox followed suit because it was over. It was a time for a new gen. This is one of the reasons besides for the decline in installed base spending why PS3 sales have plummeted. You're not exactly arguing my point that the PS2 is a spokes in the PS3's wheel even though it makes Sony extra money.

The Xbox 360 is not the same price as the Wii. The arcade will be $200 after the price drop launch in September.

When I say skyrocket, i mean compared with whats selling today, not in comparison with the wii, for example. ´The wii is winning this gen cause is too far ahead, even if it´s sales stagnate, and ps3 doubles, by the time ps3 reaches wii levels, this gen is finished and another has begun. But is my opinion taht the ps3 price is holding demand, specially from most of the ps2 owners. If you think that there are 120 mln ps2 owners, you guess that maybe some of them want too get the ps3, if only too continue to play the ps2 games while they wait for decent ps3 ones. But as the price is too high, they wait, or get another new gen console. As for the gc comparison, it sold only 30 mln units and a max of 6,3 mln units in it´s best year, whislt the ps3 will probably make to 12 mln this year. If it keeps that path in the next 2 years, it may end up with 80mln total, wich will put it in the top 5, among wii, ps2, ps1 and nes. Not bad, certainly not what they(sony) were expecting, but not a complete failure. As for the x360, the same logic of not perfect, but not bad works. In the nex gen they should work on the hw reliability and on IP games, so they have more exclusives than unreliable 3parties. Sony proved that this is not a good strategy, as they lost a lot of console sellers this gen. Matter of fact, if gtaiv was still a exclusive, this game alone migth have settled the 2nd place dispute, as it selled a total of 10 mln units.

Interesting input. I think the initial price tag of the PS3 held sales back. Also I have heard complaint as to the library of games in the first year or so. THings do seem to be picking up now.