Re: PS3 hardware chip versus software emulation (for PS2 games)
The original 60 and 20 gig PS3 models contain the PS2's processors inside in order to be backward compatible for PS2 games. I don't know if it's fully compatible, but I own over 100 PS2 games and they all work upscaled to 1080p.
In order to reduce costs, Sony cut out the PS2's processors and switched emulation in the 80 gig model to be software based. There is a big difference in the number of games that can be successfully emulated by the software emulation compared to the hardware emulation. PS2 backward compatibility was pulled entirely from the 40 gig model, but it still is still backward compatible with PS1 games.
Most of the reported problems with software emulation involve older PS2 games. Sony maintains a list of backward compatible games on its web site. Unless you have an extensive PS2 library, and backward compatibility is big for you, the 80 gig model should be sufficient. Otherwise, you might still find a 60 gig model lurking around a store shelf somewhere, but that is becoming increasingly difficult.