Sony have admitted that around 200 games don't work at the moment (if these are PS2 and/or PS1 games isn't specified though). This could be fixed if the future via firmware updates:
http://www.eurogamer.net/article.php?article_i d=70157
And as for downloading PS1 games, this sounds great in theory BUT are Sony only telling a half truth again? I assume all games they published will be available but how many 3rd party games will be on there? and how much will they cost?
Also this would only be of interest to me if I could buy the NTSC verions of the games. I always purchased imports for my original Playstation, mostly because I can't stand those nasty pal borders on games. If the Japanese versions of R-Type Delta & Einhander are on there though that would make me very happy!
Which also brings me to my other point - has Sony said either way if the Pal PS3 will run it's games full screen as standard (like the 360 does and so did the original Xbox)?
If I'm correct this is a non issue for HD TV owners but I only have a standard TV at the moment so this is a big issue for me and did put me off PS2 to be honest (Capcom being a main offender with rubbish Pal conversions e.g. Onimusha & the first Devil May Cry with borders that took up nearly half the screen!)