I think PS3's problem was its identity crisis. People saw it as a very expensive gaming system and - for the most part - discounted the blu-ray capability.
That was part of the problem, but I think the biggest issue was that Sony put out a gaming console but forgot to provide any games.
Now that some decent titles have started to arrive and with the releases of Gran Turisimo and Final Fantasy VIII coming soon I'm much happier with the console.
I do have to admit that the PS3 has been a very reliable system, I've never had a freeze or any glitches while watching movies. For someone that's into gaming and HD movies IMO the PS3 is really a great deal.
