Twesterm, Sony only removed the Emotion Engine from the PS3. The Reality Synthesizer (PS2 GPU) is still in the PS3. The theory is that Sony is removing that to help cut down the cost enough to be able to sell the 40GB PS3 at $399. The software emulator only emulates the Emotion Engine so the 40GB unit would have no backward compatibility. Sure Sony can improve the PS2 to encompass it simulating the functions of the entire PS2 chipset but thats not something that would be available right away or at all depending on Sony's commitment to Backward Compatibility.

I wouldn't assume that they are taking it out and I honestly won't believe it until I hear an official word on that and not rampant speculation by those who may not give a darn about the PS3 except that it fails and the wii or 360 wins the war.

What about the ps1 games that are downloadable on PSN? Would those be playable on the 40 gig PS3? Would they have to change the PSN to accomodate the 40 gig PS3?

If this PS3 model isn't to have PS2 BC, it will further extend the negativity that nearly everybody already associates the PS3 and Sony with. Because of the PS2, backwards compatibility has become an important selling point for all consoles, so it wouldn't exactly be reaching the minds of existing PS2 gamers wishing to upgrade.

Not everybody likes to keep every console they own, ideally I would love to be able to do so but practically thinking it's pretty silly to have a PS1, a PS2 and a PS3 all taking up the space around the TV. Add to that an Xbox and an Xbox 360, and a Gamecube, Wii, N64, etc etc, should backwards compatibility not exist at all. The fact is it's an extremely practical feature that should now be really seen as a standard for consoles to accomodate.

I honestly believe if the new package doesn't have BC, it'll probably bomb big time as far as sales are concerned. The PS3 is doing badly enough without having an additional model MAKE people buy a PS2 as well if they want to play those games too.

The PS2 is made of two different chips, the Emotion Engine and the Graphics Synthesizer, and both are pretty custom tailored hardware. The EE has always been relatively hard to emulate in software, but with "da powa of da Cell" they made it. The GS on the other hand is still being built into newer PS3s, because it's "really hard" (not to say outright impossible) to emulate thanks to its insane eDRAM bandwidth (48GiB/s vs. the RSX's 22.4GiB/s to GDDR3). This is also why PS2 games are upscaled and not simply redered at a higher resolution - they are still being rendered by PS2 hardware.

So, there you have it: that's where they get to save a few extra bucks. PS1 backwards compatibility on the other hand, should really be free - you should feel ripped off if it's not included (and if they end up doing that, it's because they want to sell those downloads). But PS2, not so much, and after all, if the $99 PS2 also ends up coming out, that's your savings right there.

Nice post KruzeS. And here is the definitive proof that the 80 GB PS3 still contains some PS2 hardware, from Sony themselves!

http://www.pcmag.com/article2/0,1759,2099538,00.asp

Q: Does this mean that the PS2 hardware chips have been removed completely and replaced with software-only emulation?

A: The original PS3 used the Emotion Engine/Graphics Synthesizer to emulate PS2 titles. With the latest European specification we have removed the Emotion Engine, retaining the graphics chip.