Correct me if I am wrong, I but did a little research and the EE and GS chips were combined onto one piece of silicon when the PS2 slim was launched. This is a single chip... The 80 gig does not have the EE+GS chip in it and therefore is relying 100% on software to maintain backward compatibility. If they remove one, they effectively remove the other. Further, my understanding was that the PS2 hardware inclusion was more or last a last minute decision because backward compatibility was not ready at launch so they had too and planned to later get rid of it anyway.

I'll see if I can find the article...

If this is true, then not having backward compatibility at all on the 40 gig wouldn't be a hardware limitation -- it would simply be a software lock-out to encourage people to buy the more expensive unit. That, in my opinion, would be one of the dumbest moves Sony will have made in the sales/marketing of the PS3 to date.

@kn: I'll save you the work. 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.

It's true that the EE was married to the GS for a while, but Sony has divorced them recently!

Say what? Care to explain your strange logic to me?

I'd say this cheap model is exactly the model PS2 owners need. Why buy an expensive PS3 (with backward compatibility) when you already have a PS2 to play with?  

I don't know about America, but most people where I live would prefer to sell their PS2 and use the money to buy a shiny PS3 which can play their PS2 games. There are also plenty of stores which offer exchange programmes, which would reduce the price of the higher-priced pack. Furthermore, with the better pack you get more disk space, and depending on Sony's announcement, you may get an additional controller and/or games.

Having 2 consoles in your living room can be a pain, and most people would prefer not to bother with the cable mess.

I'm sure its been said before, but I'll say it again:

This new PS3 model is just a BR player. Sony is bringing their cheapest BR player in the form of the PS3. It looses all of these features so that, when people walk into a store and see that they can get the PS3 BR player for $400, versus their stand-alone model of $500(pretty sure), they will go with the PS3. Sony sells more PS3's as BR players. Period.

THATS why it seems like a terrible Game Machine Model.

JUST a BR player?

 Last time I checked, a PS3 could still play regular PS3 games.  And there is nothing "confirmed" yet by a reputable source that states that the new 40gb model will not have any BC at all.  Those that are knocking the machine right now seem to be those who are diehard Wii or 360 fans that just want to make sure that the PS3 does not catch up to their beloved systems in the sales race and/or pass them.  

 Sure, there will be people who will buy a PS3 as a BR player, but they could also jump in and have themselves a video game machine as well.  If they have kids, you can bet that the kids will get games for it too.

The only thing terrible here, is the lies and rumors spread as truth when it hasn't been confirmed by any means.   If you don't like the PS3, just go stick to the sales, Nintendo, and Microsoft parts of the forums here.

How much can you seriously get for a 2nd hand...potentially 7 year old machine.....$30, $40....the price of a PS3 game!

Thanks for that data.  If that is indeed the case, I suspect that the 40 gig will have backward compatibility completely removed since that graphic chip is probaby still 15-20 bucks still.  If it does turn out to NOT be backward compatible, it will be interesting to see how it plays out in the market because I think a lot of people will be disappointed.

I know people want to play next gen, but there is a HUGE library of PS2 games and it would be nice to be able to play them on your shiny new console should you desire it... Methinks it is a huge mistake to remove it entirely but maybe the marketplace won't ask or won't care.

 It's actually a little more than that, but that's not the only factor.  Why do I now have to have 2 machines when one originally did the job.  When I got a Wii, I was specifically thrilled that I could still play some of my fav. gamecube games on it and get rid of the cube.  I still have about 10 cube games but no more cube...  I also have played a bunch of backward compatible xbox original games (and still own a few) on my 360.  There are still at least a dozen titles from the original XBOX that I want to play so BC is important to me.

To each his own, but again, I think sony is making a major mistake if they do, in fact, completely remove BC on the new 40 gig PS3.

In addition to that one small issue, there is a disturbing trend going on that orignally Sony hammerd Microsoft for:  Multiple SKUs...

60 gig -- 100 percent backward compatible, all additional features

80 gig -- less backward compatibility, all aditional features, game pack-in

20 gig -- no card reader, full backward compatibility, no wifi

40 gig -- no card reader, zero backward compatibility, less ports, includes wifi

None of these really seem like a well thought out console feature list other than the original 60 gig unit...

W29, you make almost no valid points.  It is not BS it is Bulltrue (Get it... Halo 3 reference) but yeah, on topic, 1st, the size of the HDD does not matter.  It is not like the 360 where you only can get it in two flavors (20/120) and are both priced ridiculously (100/179)...  On a tangent, how is a hard drive six times bigger than another one and cost less than double.  Either the twenty gig is hideously overpriced (Duh) or the 120 is underpriced (Microsoft isn't that dumb), But I digress.  Second, the reason the elite needed a new heatsink is because Microsoft manufactured a cheap piece of crap for the lowest cost they could find and then 33% of owners had to send theirs back Like you, right?  If they actually manufactured a GOOD console (read:  Wii/PS3) with lower failure rates [(virtually none/1%) I read that somewhere but I for got the link but google it] then it wouldn't need a new heatsink.  HDMI cables are not that expensive, ethernet cables:  I'm sure you have a ethernet cable hanging around your house, I have three, and one that I use.  Uhh... the pS3's controller is wireless... what was that point?, The PS3 does come with componet cables... (right?  someone help me out here.  I think they do).  And any bluetooth headset you use for your phone will work with the PS3 also.  So I just debunked all of your claims in one short paragraph.

Also, I am not a PS3 fanboy.  I love PS3 but I love 360 too.  As you can see in my sig, I have an XBOX Live account and love it to death.  so, moving on

One last thing, remember, this is all rumor and speculation, none of it is true as of yet, we'll have to wait until the "big announcement" on the 12th... Thank you.