When looking at the 360, I get the feeling that people don't really care about BC that much. However, there's a good chance that I'm wrong. Also, software sales for Gamecube and Xbox or pretty much non-existent, thus further proving my point that BC isn't really a big deal. Now, I do not expect this to make sales take off like a rocket--to just break out and sale like crazy. Furthermore, I think it's a shame that Sony was not able to keep BC in the console, since alot of people seem to like that feature. Hopefully this will help the people that want a PS3 get one.

If Pocket-Lint are to be believed....and as well BC isn't going to appear in the 40Gb model, then for £50 more, you get an extra 20Gb, 2 more usb's, a memory card reader and backwards compatibility.....there's no contest pricewise, seeing as £50 is nothing to pay for that particular functionality.

Maybe seeing as retailers are expected to take £20 off the 60Gb from £369 to £349, could they potentially throw in a game for the £299 40Gb pack...seeing as you can pick up Resistance/Motorstorm/F1 and other games for around £20 in shops and to the retailer, these games must cost them less than £10 now...so for the sale, they could potentially include a game for £299. 

It will also lose the backwards compatibility chip, although this isn't likely to affect UK customers, as in Europe backwards compatibility is done via software.

 So it has backward-compatibility via emulation.

If not, and if it's that important to you, buy as PS2 too, but you probably have such one allready

Maybe Sony could get the PES 2008 bundle out at the end of this month for close on £299 including the 40Gb model...that would sell really well IMHO.

The only way the 40GB will have backward compatibility is if Sony has managed to be able to accurately emulate both the EE and the GS. They left the GS on the 80GB PS3's for a season. Why? Because it would be difficult to emulate. Part of the reason is because the GS' embedded RAM has an incredibly fast bandwith, even by today's standards. The Graphic Synthesizer has 48GB/s of bandwith the RSX only has 22.4GB/s of bandwith. While definitely possible, a software solution will be difficult to implement because of this fact.

Sony will be running into the same type of problems as MS did with the 360. They would software emulating a completely different architecture. Actually they'd be in a worse situation than MS. The PS2's chipset was a complete custom job. It would be much harder to software emulate than the practically off the shelf design of the original X-box. 

Going on reports though.  The EE and GS were added to the motherboard of the PS3 at the last minute before launch because they didn't have a solution for backward compatibility at the time they wanted to launch.  The European model was delayed 3 months and by then, they didn't need the EE and only required the GS.  There have been reports that Sony has been trying to get the PS2 Emulation embedded into the RSX chip as well.  Also, I understand that the GS does have hugely fast embedded RAM and may even be faster than the PS3's, but I'm pretty positive that the PS2 can be totally emulated using the entire power of the PS3 utilising the CELL and RSX.

Although we don't have a definite answer whether the new model will not be backwards compatible...also the new model could be incorporating the new 65nm chipset although it's very doubtful. 

 IMO its just the PS2 processor ... so who cares , software emulation will exist anyways :) If they could get for it a good price , maybe 400$ , than this will sell :)

Doesn't anyone else remember PS3 fans laughing at X360 fans because the 360's BC was less than perfect? Even though the PS3 fans are going to go back and say well, software emulation will do just fine and will change their tune, I think a little humble pie is in order.

Yes, you're right...and the shoe is on the other foot now.  But doesn't the "Core" unit not play any old games at all, because it doesn't have a HDD.  Anyway, if the new 40gb doesn't have any BC, this WILL be a major blow, but will be forgotten after a wee while once some huge games and a better catalogue of games appear for the PS3.

"Sony is clearly hoping to make a comeback against the Nintendo Wii, which is currently outselling the PS3 four to one", an industry insider told us.

A comeback against the Wii? I'd say they can beat the Xbox 360 in the best case, but certainly not the Wii!