If you don't own at least a 720p HDTV of some size, and a nice 5.1 surround sound system don't bother buying either, seriously, it'd be a waste of money when you can pick up great PS2 titles you haven't played and stuff for the DS ect... You will not notice any great leap in graphics or anything else if you are using a low def TV.

That being said don't let the Xbot's down play how good the PS3 up scaler works on PS2 games. If you have a large HDTV PS2 games look pretty good when upscaled by the PS3, matter of fact I'd compare Resident Evil 4 upscaled by the PS3 to some of the earlier poorly developed 360 and PS3 titles, the only down side is that at the moment it has no vibration support since the 6 axis doesn't vibrate. Even with that I feel like the investment in the PS3 was worth it just for the improvement in PS2 games I still play and plan on playing as I have time.

The 6 axis control is dumb in my book, but a wireless dual shock will be available before too long.

Just be sure to buy a PS3 that does have backward compatibility, the older versions that have PS2 hardware in them are the best, and are still available I think, but are one of the more expensive options.

Xbox live generally has superior online support, but it does cost money. PS3 stuff is free, and at least so far I haven't had many problems and I have spent 100s of hours playing Ghost Recon online.

As far as HD movies go it's still hard to say if Blu-ray or HDDVD will win out. I'm figuring Blu-ray will since it is the only format with any following from PC users and the pornography industry has gone with Blu-ray, and their support was the deciding factor in the Beta VS VHS format war. I'd also say more hard core movie geeks have jumped on the Blu-ray band wagon because it holds more information, to the point that Lucas insist all the Starwars movies be on Blu-ray, even though the studio sided with HDDVD.