Wow, I just read through a huge thread on the official PS3 forums about the PS2 problems on the PS3. It seems a handful of guys there (a couple of 'em with tech degrees) have actually figured out the problem, and believe full well that it can be alleviated via a firmware update.
Basically, it only affects games that output at 480i (the vast majority of PS2 games, though PSone titles aren't affected as they output at a lower res, and neither are PS2 titles that have a progressive scan mode, like SoTC or SOCOM), because the RSX is incapable of displaying an interlaced image. What this means is that there is software in the PS3 that deinterlaces the image from EE+GS, and then outputs. What the guys have figured out, is that the RSX displays pixels in 'quads', which is four groups of four (16 total). There is a glitch in the software that is causing the first 'quad' to be flipped horizontally, which over the whole image, causes the jagged look.
There are a shitton of zoomed in pics where they prove the theory, and since it can't be a hardware issue (as RSX can't output an interlaced image, it has to convert) they're all hoping Sony will eventually fix the glitch. I've really paraphrased everything here, so if you want more details, check out the thread. It's like 30 pages though, so be warned.
As for me and FFXII, I've hooked my PS2 back up, and I'm going to stick with that for now. Hopefully this issue is fixed sooner rather than later, as my entertainment center looks a lot nicer with just the one system.
