Poor graphics on PS3 when playing PS2 game

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Greetings all,

I've been trying my Final Fantasy 12 on my new PS3 today, and I was surprised to see that the graphics were worst than on my PS2 console. Both in gameplay and CGI sequences, the sharpness is gone, edges are jagged, making everything look kinda like Wolfenstein 3D sprites :p

I've tried changing resolutions on the PS3 display setting; 720p, 1080i and 420p are all the same. I've tried removing my HDMI cable and reverting back to AV (like I had on my PS2); again same.

Does anyone know if this is a known issue with the PS3 or is there something I've missed? The game itself has no settings that will help (only screen size.) I have a 62' plasma TV and I admit I haven't tried playing with those settings yet. But any input would help. Thanks!
 
EDIT: I actually found the issue while doing a bit more research... turns out Sony had a flaw on the PS3's backward compatibility issue. Looks like it might have been fixed on a firmware update a while back... Can anyone confirm if the update really resolved the problem?
 
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