I'll let the other forum members handle the PS3 video question, since there seems to be a lot of user preferences noted here. But if the picture is working, then it's processing correctly.
As far as the firmware goes, I wouldn't update it unless there's a specific reason to do so, such as you're having trouble starting it, or there's an issue that the firmware specifically addresses.
Hope that helps.
I recently purchased the above mentioned Samsung. I changed my PS3 settings to 1080P in display settings and popped in a Bluray. Info on TV said 1920 X 1080 @ 24Hz. Is this the best setting for Bluray? I read in the PS3 forum that most TVs wont process 24Hz well and to turn off the 24Hz setting in the PS3. You can have that setting as "ON" "OFF" or "AUTO" and I have mine on "AUTO". Is this the setting I should be using? I am also concerned about running the 1.4 firmware upgrade as well, seeing some scary stories about TVs not working after upgrade attempts................