I thought the feature was fine, but then my tv upscales the picture completely, and I didn't expect the games to look particularly good on a big screen. Although I found multiplayer tekken to be pretty good, since it is just like playing on the ps2 (both people can look at one screen).
I know it seems like Sony was being cheap by not "fully" implementing the video out feature. But I would be willing to bet, this in game letter-boxing is due to a technical reason. Specifically, upscaling is the culprit. The psp runs at 480x272, while 480i/p runs at 640x480. When in the XMB, the psp has spare power to upscale. But this can't be done during a game since it would impact the game's performance. A similar reason related to interlaced vs progressive would explain why composite cables do not allow video game out. In order to get around this, sony would have to add an extra piece of hardware to upscale the video output. And this would of course cost money, boosting the slim's price.
However, I heard that the 3000 does not letter-box video game output or allows video game output on composite cables, or both (perhaps this has been confirmed?). If so, this would suggest that Sony was able to work out the pricing on the extra hardware.
Now I can't prove my idea, but I think it would be the most logical explanation for what would otherwise seem to be a ridiculous oversight.
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