Sony really must be run by a bunch of idiots... It's being conjectured that come September the new 80GB PS3 will be the only one on the market and it will not have any backwards compatibility to the PS2.
So they went from having a PS3 model with PS2 HW built in for compatibility, to a PS3 model with PS2 compatibility provided via software emulation which doesn't support all the titles on the market. And after this they expect PS2 owners to still upgrade... I'm willing to bet the value of a used first generation PS3 just went up.
They really ought to just call it a DVDstation and be done with it...