This is about people being able to reuse their old libraries rather than purchasing them all over again. Also, many like me want hardcopies not digital stuff. Lets say, in the worst case scenario, SCE shut down and your HDD corrupted, how do you get those digital copies back?

I wouldn't call it "entirely new", it's something they were doing before.

PS1 games ran on a far more traditional cpu/gpu combo. the emotion engine of the ps2 combined with other proprietary parts is proving a problem to emulate properly. if you remember the first sets of SW emulation ps3s still had half the ps2 hardware in them. your also looking at a massive difference in level of technology between the ps1/ps2. ps1 hardware emulation requirements are so low at this point in time your cellphone could handle it. the PS2 however due to ints unusual hardware not so much.

things to think of. this could be a problem for the ps4 if they do choose to drop the cell and change exotic chips again. I dont think they will but just putting that out there.

In short, its because the PS2 did not use more common parts, and the PS3 did not build on the foundation of the PS2. translation instruction sets over different cpu/gpu concepts is a pain.

Look at the 360s emulation of xbox games to see the pain emulation of a different hardware environment can cause, frame rate issues. some levels in games (looking at you halo 2) cant be done due to the strain it puts on hardware with the emulation. some games cant be done due to the reliance on things that were particular to prior platform chip design.  

think about this coding is what MS is best at not hardware, and their emulation is clunky.... sony has never been know for its awesome coding/software skills, sony is good at hardware. It would be best for sony to get the price down to where it could reintroduce all the ps2 parts into the ps3. I see this coming in 2010, when they feel cost control will be in effect, that would givethe ps3 2 years on market later in life with that feature before we see a ps4 

yea, but it would be its own production line, require a new board design that will be different from the ones used in other PS so cost will be higher, and a line will have to be retooled to handle it. if they make the change it will be best to do it across the whole line. other wise cost will get out of hand. .... it would have to make up a large % of sales to avoid that, like say the amount the core is for the xbox 360 where the board has been moded to take a lager flash ram unit, a far more simple mod then adding hardware from a prior gen to help out a SW emulator run last gen games... thats all kinds of modifications 

If you ask me, I think one reason sony discontinued BC is to save ailing ps2 sales since that is all profit but I could be wrong. I really don't think the cost difference is that great except they blew up all the plants that made mgs4 ps3s. I'm taliking of simply getting old plants back to working condition and these new ps3s would be sold for $100 more.

Its a lot more difficult to change a MB layout then it is to slap a new case on a unit. ever wonder why the rest of the xbox line got hdmi when the elite came out? its cheaper to do it that way. cases are cheap boards are not, and if your going to have different boards sales of both need to be very good. 

The only thing that will increase systems sold would be a price cut. They dropped BC and it has been probably too long for them to add it back. Adding BC back will never sell as many systems as a price cut would. The argument saying that former PS2 owners would jump on board that haven't is complete b.s. since they would have jumped on board in the beginning. They didn't jump on board in the beginning probably because of the initial price. So if anything you have to have a price cut and possibly add BC.

Umm simple answer...
Price cut