the 1.90 firmware is out and some pretty cool updates there  im still hoping for an update that can put the PS3 to play divx or xvid formats, will this ever happent?

doubt it...

Do they have a financial incentive to do so?

They said in there blog they were working on it, as well as working on AVI files to be supported on the ps3.

i really want that updated to play my divx xvid avi and more

Its probably coming in the 2.00 firmware or 2.10, in game xmb has been confiremd by sony in the blog that they are working on it.

try linux under PS3 should, VLC / mplayer should support all formats

y dont wanna install linux, i need divx playback directly from the PS3 player

Isn't the problem with supporting other formats is that they'd have to pay to be able to support them and other formats are used for things like pirating movies and such?

But yea, more file format support would be awesome. I have more than 2 gigs of videos that could be thrown on the HDD if a couple of formats were just supported. I recently (20 minutes ago) got my external HDD formatted in FAT32, thus making that partition compatible with the PS3 so I can transfer all the movies I currently have and all the ones I'd like to have on the HDD onto the external HDD and free up a majority of the 30+ gigs I currently have taken up on my PS3's HDD and use it just for music, photos, and games instead.

 DivX is indeed private, however xvid is completely open source. Sony Pictures may throw a hissy fit over the piracy thing, but most likely support will come regardless.