Playstation 3 Backwards Compatibility and Upgradability

My PS2 has finally died, and I am looking to hunt down a PS3 60GB for the hardware backwards compatibility. I've located a few for ~250$. Since I've never really used a PS3, I have a few questions. First, the one I am looking at the most says it comes with the 2.7 firmware. If I upgrade the firmware, will that completely remove hardware backwards compatibility for PS1 and PS2 games? According to Wikipedia all firmwares can play PS1 games, but emulation for PS2 games seems to be a bit less clear.

Second, can I replace the internal hard disk with a custom one (something like a 1tb hitachi travelstar)? I've found reports that the hard disks are user upgradable on wikipedia.

I'm just trying to figure out the current "state of the union."

The firmware should only be especially relevant if you have the 80GB model that implemented software emulation (which was comparatively poor at first, although I believe newer firmwares improved it some). The earlier 20GB and 60GB models actually have the CPU and GPU of a PS2 onboard, so it's practically working natively, and that'd be the best approach. The newer firmwares do not disable this functionality.

All PS3 systems can play PS1 games on all firmwares (it's all software emulation, which is trivial for a system with the PS3's horsepower), so this shouldn't be a concern.

Note that Sony actually keeps a database on what works properly. The support isn't 100% across the board for any variant of the systems - there are a few games that are buggy.

The hard drives are upgradeable relatively easily, and there's built in backup and restore functionality.

Current generation "Slim" PS3's have software backwards compatibility. They won't play any PS2 games, but they'll most PSX games.

The 60GB launch PS3, however, most certainly will, due to it's hardware backwards compatibility, as you know.

Since this PS3 has the guts of the PS2 inside it, firmware updates do NOT affect it's compatibility. Personally, I have two launch PS3's, and they both make no fuss whatsoever, no matter what game I play. I have tried to keep them updated as needed, although I'm not OCD about it. No problems, either way.

As for hard drive replacement, as @RESPAWN said, the PS3 has tools for data backup, and as long as you have a laptop SATA HDD, you're good to go. Pop off the side panel, remove the screw, the casing with the HDD just slides right out. Replace HDD, and you're good to go.