Even if 25% won't play, you still have a huge back catalogue... Sony has to drop its price, its trying to play justification not to left right and center, but it knows it has too, and it will.... its just a matter of how long they will wait before they do it.
If they wait too long they will be screwed, they can't surive losing 3rd party support. Unlike Nintendo, Sony cannot rely on in house characters and game development to cary them through a poor console installed base. They are already losing exclusive titles.... They cannot afford to lose 3rd party support entirely.
With the costs to develop games on this Gen, particularly the 360 and PS3 with their insane graphics and such, developers will pass over a system who's installed base is too small to justify sales... or if they do, they will be lousy ports.
I think in the long run Sony will be fine, IF they stop being arrogant and deal with the obvious issue in front of them... which there are many, but the single biggest is simply COST.
When I can find your New system on the shelves in stock at Target 2 days before Christmas, and it was just released about a month ago... you have trouble... (true story by the way).
"Must Have" games will drive sales, to a point, but $600-$700 a pop is a pretty big hit for most of your target audience Sony. And why you would decide to stick with the most uncofortable controller ever designed for a 3rd generation is beyond me. Cube hands down had the most ergonomic controller bar none of last generation.
Sony needs to get their system down to the 300-400 range quickly, or they will risk serious long term viability of the console. The emulation of PS2 support is probably just one of many cost cuts you will see Sony make on its console... It can put on the arrogant face in front of the press, but its pretty obvious they are in trouble in the short term with this beast, and need to do something or they will wind up in long term trouble as well.
The sad thing is that Sony will not be cutting the price of the system with that cost saver. It'll just cut their per-unit loss by a bit.
I'm pretty much done with the arrogance of Sony. I'll keep being entertained with my Wii. I've bought an extra set of controllers, some Wii points and four games, and I'm still not up to the price of a bare PS3 yet.