Does the PS3 have the best video quality of Blu-Ray players?
Nothing is definitive, but most agree that it does. Additionally, it now offers 1080/24p output, which not all standalone Blu-ray players do.
How could that be possible? It is so inexpensive compared to other players.
While that is true, Sony is known to be subsidizing the PS3, while the other players are not subsidized. Sony wants to ensure the future of both Blu-Ray and PS3, so while this loses them money in the short term, theoretically, it will be a financial win in the long term.
For more info, Sound and Vision magazine has shoot out of the first batch of Blu-Ray players here . I'll ruin the ending, PS3 wins.