Re: Playstation 3 as Blu-Ray player.
If anyone hasn't done the 1.8 update, I HIGHLY recommend it. I too agree that the DVD playback previously was unacceptably soft. With the new update on my 50" Pioneer plasma (768p), it is comparable to my Linn Unidisk SC upscaled via an iScan VP30 to 1080i.
In addition, the 1.8 update makes this a very capable media extender as well, which is great! I use this with WMP 11 and Nero Digital Home to extend my PC media to the living room. Been waiting for that, and it works well, but to stream high-def, you need to have wired ethenet and not 802.11g.
Another nice feature of the newer firmware is 1080p/24 output, which it didn't have before. The improvement in my environment is entirely psychological though. My Pioneer plasma only accepts 1080p/24 and not 1080p/60, even though it's a 768p device. My geek nerve is just stimulated by the fact that the tv doesn't have to do 3/2 pull-down or de-interlacing - only rescaling. Pointless, really, since there is no visible difference in my particular environment, but I can at least acknowledge my psychological hangups.
As for gaming, I'm still a pc snob, but everything will be different no doubt once Guitar Hero III comes out. And maybe Half-Life Episode 2. Ahhh, what I wouldn't give for a mouse/keyboard for shooters...