Like @scoots9 said, there are some PS3 games that support 1080p, but not many. I think God of War 3 supports it (if not, it probably supports 1080i). But by looking at the back of the box of a couple of my games that's laying around, most of them only goes up to 720p.
Your buddy's argument is since your PS3 is set to 1080p then his games should be in 1080p also, right? No.
Since his PS3 is 1080p, the home page menus are in 1080p, but the games are a different story. I have 2 PS3 games laying around, Heavy Rain and Killzone 3, and I would (and most people would also agree) say that both are absolutely amazing looking games, but both of them are outputing 720p, according to the back of the box.
My two arguments to throw in the pot are: cheaper games (you mentioned already, but it is SO much cheaper than games on consoles, especially with the deals on Steam) and there are a huge selection of great indie games. The consoles have a very limited selection of indie games, because the process to publish an indie game on the console are so much more work than on the PC. Great indie games like Superbrothers: S&S EP, To the Moon, Lone Survivor, Realm of Mad God, Atom Zombie Smasher, Machinarium, Frozen Synapse, Terraria, and so many more awesome games are criminally overlooked by console gamers.
Maybe not convincing your friend to get a super expensive rig, but a decent rig to get started in PC gaming, and then he might realize why thePC is superior.
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