[quote name='mykevermin']It's good to know that there isn't any massive hardware issue that gets in the way of upscaling. That's what seems to have scared away a number of the HDTV-savvy CAGs away from the system thus far.[/quote]
Well that, and the $600 price tag and no games to speak of.
Seriously though, I think the reason Sony hasn't revealed the process for vertical upscaling is a combination of what SCps3player said and also fears of developer laziness. Why should a developer spend the time to create a game in 720/1080p when they can just develop in 480p and let the PS3 upscale to native resolution of the TV?