Since you can install Linux on a PS3, when a Linux BD player is released (or maybe one already is) that does cool things like disable UPOs or allow future BD things like PIP, couldnt you just use that to play BDs on a PS3?

In theory yes.
However right now, playing hd in linux is worthless. Atleast for me.

The graphics chip is crippled under Linux, untill sony allows people to fully access the hardware under linux nothing can be done. I doubt this will be done anytime soon, as it then turns PS3 into a PC and defeats the whole console marketing strategy. Maybe some hackers will figure it out though.