[TMWNN]

>The PS3 was an extraordinarily expensive console, between the cell processor and the bluray drive (iirc this alone was several hundred dollars)

Sony singlehandedly did a lot toward adoption of both DVD and Blu-ray, by the PS2 and PS3. The former's ability to play DVDs out of the box was a huge differentiator between it and GameCube/Xbox. My understanding is that PS3 at launch was not only the cheapest Blu-ray player available by several hundred dollars, but also excellent quality.

>It was a financial disaster for sony really, moves like ripping out the embedded ps2 make complete sense in that context

You can see that in the history of PS3 variants. It's normal for consoles to get a major redesign to cut costs late in their history, typically just before or after the successor is out. PS3 redesigns were a) many and b) very early in the console's lifetime, relatively speaking.