I really want a Blu-ray player, but it is worth getting a dedicated player rather than a PlayStation 3?
In a word, no. And here's why: the most important factor in deciding which DVD, HD DVD or Blu-ray player to buy (in your budget range) is surely the quality of picture it outputs, and the PlayStation 3 is excellent. Its Cell processor is basically a supercomputer, so handling top-notch imagery is not a problem. On top of that, the PS3 is the quickest Blu-ray player in terms of start-up. It's also extremely quiet (partly because of too few fans -- it gets very hot).
Here's the real kicker, though: the PS3 is the cheapest Blu-ray player available. This is thanks to a massive subsidy from Sony, which desperately needs you to start buying movies for it.
No, no, wait, come back, there's more. The PlayStation 3 is one of the first devices to use HDMI 1.3, which is able to convey the highest-quality sound, as well as 1080p video, over one cable. Obviously you'll need a TV with this input to take advantage of this feature, but they should be along shortly (you can use any HDMI input, or component if you don't have an HD Ready TV). At the very least, it's a form of future-proofing.
The PS3 can also play MPEG-4 and H.264 video; MP3, ATRAC and WAVE audio; and display JPEG, TIFF, BMP, GIF and PNG images in an absolutely stunning slideshow display, where each image is dropped on to a white board like a real photo, accompanied by music if you like.
The only drawback we can think of is that the PS3 doesn't upscale standard DVDs, but Sony has hinted this functionality will be included in a future firmware update. We might even go so far as to speculate that streaming media over Wi-Fi from a PC could be made available as well. Although don't expect it to play DivX.
Oh, and it plays games.