Has the PS3's backwards compatibility been compromised?

[Daze]

I have read that on the new generation of PS3's (the 80 gig ones) have eliminated the "Emotion Engine" (PS2's chip) from their hardware specifications and are instead relying on software emulation (like the xbox) to play older playstation games. This was done to cut down on production costs apparantly. Has anyone bought the new PS3 (or the older one for that matter) and noticed any problems with backwards compatibility? I have a huge PS2 collection which I'd hate to see go to waste...