Here's some info on the latest firmware update from some Sony Engineers,
This is a translation from a story at watch.impress.co.jp
* Apparently movie studios are satisfied with BD-Live functions in PS3. Its processing speed / graphics rendering is much faster than dedicated players and the performance gap won't get narrower soon. Even among current BD-Java titles, some are doing performance profiling in a loading screen and show richer effects on PS3. Such differentiation by player performance may happen for BD-Live too. It is not something special only for PS3, it's in the spec of the BD format.
* 2.20 has neither Managed Copy (w/ transcoding) nor Portable Copy (w/o transcoding, demoed at CES) implemented.
* In-game XMB is one of the features discussed at SCE, but they can't comment on the date and so on yet. Though some of the XMB functions are already available in-game by an update, not many games support them yet.
* To licensee developers, it was announced that 2.20 could reduce system memory resource usage a lot.
* The web browser runs faster and has better streaming support than before. Though they can't comment on which particular service they'll support at this point, it will be improved further.
* Though it's technically possible that PS3 charges fees for certain updates, they continue free updates as the basic concept of PS3 is a hardware that evolves with updates.
* Optical discs and media files (including DLNA) are played back through 2 different paths in PS3. Functions such as noise reduction are first implemented in the optical disc player, then some of them are applied to the media player. While an optical disc player only requires an implementation in the range of an official spec, a media player needs a different know-how or sometimes a new algorithm to support files authored by general users with varied encoding settings. The playback quality of AVCHD is currently higher when you open it from a disc or a memory stick than from a file in a folder.
* The main target of mosquito noise reduction is recordings from digital TV. It assumes a use case where a user plays a long MPEG-4 AVC file recorded on a BD. The upconversion in 1.80 was useless for a noisy movie, so noise reduction (not only the specific function of mosquito noise reduction, but also other filters) has been improved in 2.20.
* Though mosquito noise reduction is high on the processing load, the total load is lower than that of the first version of the PS3 BD player or 1.80. In 1.80, it was almost full load when upconverting a DVD, but not now due to optimization. Currently it doesn't reach full load unless it plays back 2 AVC streams in Picture-in-Picture while running high-load BD-Java.
* As for 1080 deinterlacing and DTS-HD MA, "please look forward to them."
* The LTH support took time since they had to test it with a LTH disc recorded with a Sony BD recorder.
* The update schedule is not different from before, basically a large update is once in a quarter. However the next update may be soon because of the PS Store.
* It's recommended to update a PS3 since BD titles with new encryption keys start to appear. Though 1.80 already has the latest key, image quality in the latest firmware is a lot better. An updater for PS3 is also contained in some movie titles. The Blu-ray version of Resident Evil 3 has a 2.10 updater.
As for 1080 deinterlacing and DTS-HD MA, "please look forward to them."
Has a lot of people talking.
A lot of people have been saying the PS3 would never do DTS-HD-MA because it was a hardware problem, this should put that argument to rest!!
For all the cries of the PS3 being overpriced I must say in the long run it is quite the bargain!