The 40GB PS3 does play PS1 games though, because it doesn't require any chip to run them.
IMO, the 40GB is still a good purchase. What it's missing is:
-Card readers (SD Card, Memory Stick Pro, and Compact Flash)
-Just two USB ports
-No PS2 BC.
-Cannot play SACDs.
If you need more USB ports, you can get a USB hub. If you want card readers, you can buy them (although they aren't needed IMO).
I own a 20GB and while I like it, my two big problems with it are 20GB is not enough (40GB would be a lot better) and it doesn't have WiFi like the 40GB (I definitely could use WiFi). To some extent, I wish I had a 40GB over my 20GB (mostly because of WiFi though).
40GB is still a great deal because it has WiFi, plays blu-ray, plays PS3/PS1 games, and does pretty much all the same things the other PS3 models do.
[quote name='Duckbutt']Get the 60GB version instead! It's only a $100 more and most retailers are giving you two games or a game and a controller with the system. That's a much better deal than the 40GB, and the 60GB is a better system overall.[/QUOTE]
60GB consoles are pretty much gone now (last place who had them I know of is Sam's Club, but they are $550 there with MotorStorm), even in areas that had tons of them. Most of the ones you'll find now (which are open boxed), used, or sitting on a store shelf for a while are usually dead on arrival (not trying to sound harsh, but there seems to be a high number of people who got a 60GB not too long ago, used/sitting on a store shelf for a while) and ended up not working. 80GB on the other hand can be found.