This is from ZDNet blog:
PlayStation 3 doesn?t do 1080i Posted by Adrian Kingsley-Hughes @ 4:15 am
Do you own an older CRT HD TV set that only supports 480i, 480p, and 1080i? If you do, Sony's new PlayStation 3 has a surprise for you - it doesn't do 1080i.
What this means is that the image is downscaled from 720p to 480p instead of being upscaled to 1080i. This problem specifically affects games designed for 720p but not 1080i, for example Resistance: Fall of Man, NHL 2K7, Tiger Woods PGA Tour 07, and Need for Speed Carbon. This upscaling is something that Microsoft's Xbox 360 can handle without a problem (although it can have a problem with 1080i).
There's no word from Sony yet as to whether this is a problem that can be fixed via an update or whether it's a true technical limitation, so some early adopters could be in for a nasty (and possibly expensive) surprise. If your HD TV doesn't support 1080p and you're not in the mood to buy one that does, then you might be better off waiting a little while and seeing how this one plays out.
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