"Sony is actively pursuing the ability for older titles to run without the blurry upscaling seen on PS3, suggesting that native HD resolutions are being targeted."
Link: http://uk.ign.com/ar...-game-emulation
Could you use physical PS1/PS2 games or will it be download only is my question, this isn't connected with Playstation Now I don't think. Streaming PS3 games and full BC for older systems sounds like a great move.