Some terrific news for you folks today. The PS3's newest firmware hit late last night and this one is arguably much better than 1.60. Firmware update 1.70 adds some awaited features such as making downloadable PlayStation One games playable on your PS3 and enabling vibration when the Dual Shock and Dual Shock 2 controllers are used via 3rd party USB adapter.
Go out and get yourself a USB adapter for the PS3, if you don't already have one. Likewise, we'll keep our eyes open to see if this also means that the PS2's steering wheels will now be able to properly receive force-feedback from racing games (not just vibration). Thus far we've heard that wheels are working as they should.
Additionally, you'll notice that your PSOne games aren't working on your PS3. Please be aware that Sony has issued a statement saying: "[PSOne] software downloaded and played on [a] PSP™ earlier than v 3.30 should be exchangeable by downloading it again from the “Download List” of the PLAYSTATION® store." In order words, Sony will allow you to re-download your PSOne games so that they're playable on both your PS3 and PSP. Copying your downloaded PSOne software onto your PSP is as simple as connecting the PSP to your PS3 (via USB).
Moreover, PAL gamers are claiming noticeably increased backwards compatibility; mentioning increased resolutions (480p and 576p), improved performance, improved game support, and improved framerates. Clearly, a number of games still don't work, but that number seems to be dwindling down quite rapidly for PAL PS3 owners.
– Downloadable PlayStation games to be playable on PS3 (read full details above).
– Saved data for PSOne games can be transferred to PSP
– Vibration for PlayStation and PlayStation 2 controllers enabled (must use PS3 USB adapter).
– Improved backwards support for PAL/Euro PS3s.