IGN did some extensive testing on the PS3's new update that scales PS and PS2 games to full 1080p resolution. Even shrunk down for embedding purposes, it's obvious that the upscaling and smoothing can really just add a lot of blur to an image. In some places this is good (like those crowds in the back) while in others, it just makes us need glasses (like on the text or maybe even the Undertaker himself).
It's a predictable response from Sony, really. Ditch the jaggies in 480i games and accept the consequences. But how does the system deal with 480p-supported games?In short, poorly. IGN decided that you are better of not scaling 480p games because while a little more jagged, the image was also a bit more defined. Just examine all of the lost ground information on Burnout.
In general, this is going to be a game to game decision for PS3 owners. Sony cannot add texture information to old games, meaning most surfaces will blur for better or worse. Water blur = smooth ripples. Brick blur = muddy walls. I, for one, am glad to have the option.