Replacing my aging fat PS3, but I want to keep my 500 gig HDD. Question...

That will work just fine.

I thought that would not work as simple as a backup/restore. The new PS3 will not recognize the backup file of the old PS3 (at least, not in its entirety, as far as protected video/audio/game content).

You would have use that special migrate function (where you connect the old PS3 to the new PS3 with a USB cable), then de-authorize the old PS3, then authorize the new PS3, then backup the new PS3 to an external hdd, then swap the 500 GB drive into the new PS3, format as new upon startup (when it doesn't recognize the drive), then restore from the backup file you just made...right?

The only issue I had with restoring to a new system was with Sing Star.

Did you know you can trade in your old (fat) PS3 for a 160GB PS3 for $99?

Before trading it in ... back up all your data. Then, if possible put back the PS3's original hard drive... that way you can keep the 500GB hard drive to put in the 160GB PS3.

My 60GB got the YLOD after 3 years. I got it exchaged free because I bought extended warranty. Then it YLOD-ed again after 3 years so this time I'm exchanging for the 160GB for $99.

The 160GB is a slim and those don't have a yellow light so there is no chance of YLOD.

YLOD just happened to me last Friday, it is a 20GB bought at launch and has been serving me well. Spent an hour on the web tryng to look for fix... finally bumped into a YouTube video when the guy mentioend about the replacement offer!!!

I have just initiated the replacement process.. for $99 (+ tax, free shipping) I'm getting a refurb 160GB Slim.. to me, this is a fantastic deal.. 20GB (no WLAN) to 160GB with WLAN

especially Street price for refurb is $160+ shipping. My lucky day!