20GB is not much space. My 60Gb has at least 10GB reserved for PS2 dashboard. Leaving only 10GB for you to use, If you like downloading stuff, the 20GB version will not cut it, and you will end up buying a larger HDD which costs more than $100 for 60GB or higher. The 80GB is the true PS3. There is no need for 40GB version. 9 out of 10 people would rather get the better model even if they do not use all the features. The funny thing is that those who do settle for lower model end up spending more money in long run.
As for Backwards compatibility, I have seen issues on my 60GB, the main issue being Chrono Cross freezing. which is a PS1 game which is suposedly flawless. But Sony never promised flawless BC, in anycase who said PS3's were still even using the hardware for BC. With the latest update, all PS3's will use the same firmware right? Which could mean that all PS3s are software emulating, which is why Sony removed the chip in the first place.
