The PS3 is very good as a media centre. You can swap out the hard drive for a bigger one no problems, instructions on how to do this come with the machine. If I was, for instance, to download all five series of The Wire onto my computer I can either stream them from the computer to the PS3 (wireless or cabled) or copy them onto the PS3 hard drive so I can watch it without the computer having to be on. Same goes for photos and music. Get the bluetooth remote control for ease of navigation and save having to use the control pad.
Sound output will be as good as your amp/speakers as it now supports lossless audio output when watching a blu-ray movie. Also the latest firmware made the iPlayer a central component and the quality is pretty good as long as your connection is fast enough.
Plus…..it has some awesome games as well.