According to this article, gamers who own older HD sets that feature only 480i, 480p, and 1080i resolution input capabilities will have to settle for the display quality being downsized as the game boots in its 480p mode rather than upscaling the image from its more desirable 720p mode to the TV's 1080i. We tested this development on older HDTV sets with games designed for 720p but not 1080i -- Resistance: Fall of Man, NHL 2K7, Tiger Woods PGA Tour 07, and Need for Speed Carbon. Sure enough, the system downshifted all four titles to 480p rather than moving up to 1080i.
IGN contacted Sony representatives for comment regarding this feature, but SCEA spokespeople have yet to return our phone calls as we went to press (we'll update this story when they do). It is not known yet if this is purely a software issue or a deeper technical problem and whether or not this lack of upscaling might be resolved on launch PS3 systems in future updates of the hardware via downloadable firmware patches.
It's good thing that I am not interested in the system, because I own a new 32 inch sdtv from sharp. I don't have the pocketbook for a hd tv. This means a lot of gamers will be screwed if there is no firmware patches for this.