He's talking about the slight FS Antialiasing provided by the Smooth filter in the PS2 emulator.
EDIT: The only game I have ever observed looking worse upscaled and smoothed was God of War. I turned off the in-game smoothing, and it looked fantastic. Sometimes that can do it.
Now, it's true that if all you want is a 360 with a hard drive and a wireless controller, and you don't care about having to change the batteries every day you use it very much, and plugging it in via ethernet isn't an issue, and you don't want XBL, then yes, the 360 is cheaper.
But let's say we don't care about Blu-ray or HDDVD. Let's say, all I care about is ditching the reliance on a near constant supply of AA batteries, and drop the $50 on a play and charge kit. Reasonable, right? I mean, this isn't a niche desire, is it? I don't think it is. Of course, the biggest feature of the 360 is XBL, but it's practically crippled without online play (at least, that's what some people would have you believe - I, personally, don't care too much about online play outside of MMOs and the occasional Live Arcade game, but it's nice to have around), so we must go with the flow and drop another $50 on a Gold XBL subscription. Again, this is something that just about everybody does, something like 80%, so I think it's perfectly 100% reasonable to factor it in to the overall price, as it applies to most gamers.
Just using these two, very common factors, We have the 60GB PS3 at $500, and the 20GB 360 for... $500. Again, I'm assuming that the rechargable battery kit and ability to play online are fairly standard accessories, made further reasonable to put here because the SIXAXIS is rechargable out of the box (you can even charge it with your PC), and online play is free as well (This is not a comparison of features between XBL and PSN short of online play alone, btw).
So here we are, using two parts that I, personally feel, are pretty much essential to a majority of gamers, and the PS3 and the 360 are equal in price.
However, as I mentioned in a previous post, many of us don't have the luxury of having a router within 5 feet of our 360, and aren't thrilled at the idea of running a 30-foot cable across our tile kitchen floor for the rest of eternity, just to download the newest demo or gamer picture. For us, being able to connect our console wirelessly is, really, required if we want to take it online. Now, seeing as how online is the "big thing" right now, that seems pretty important.
Bam. Another $100.
PS3 = $500, 360 = $600
Now we are, in my case, at the absolute bare minimum to making the console even reasonably usable. Yes, I really do need the play and charge kit, I'm really keen on playing Assault Heroes over XBL, and I couldn't go online anyway without the wireless adapter. I don't think this constitutes silly fluff or unecessary features. I consider these to be paramount to my enjoyment of the console, and so do, I'm sure, many other people. Keep in mind that the PS3 used to be $600 too, yes. I paid the same for my PS3 that I did for my 360, BEFORE the price-cut. I adore both the little weasels.
But it goes further! I happen to have an HDTV. It's not a 42" Bravia or anything, just a modest 32" Olevia 720p LCD. While it may not be arrayed in splendor, or be made out of gold, it does produce a nice, high definition picture. Normal television looks like compressed garbage (because it is) and DVDs look a bit iffy as well. I am an appreciator of high resolutions. Blu-ray makes me exceptionally happy. I'm thrilled about Blu-ray. Do I need it? No. But I want it. I want a high-def video player, and chances are that you will want one as well in short order.
I am NOT paying $200 to add high definition video to my ALREADY $600 xbox360. Sorry. $600 was pushing it as far as my budget goes, even for the PS3 that had Blu-ray built in. $800 is a strikingly larger number than that (Honestly, I work part time and make $400 a month... I'm not certain how I afforded both consoles and all the games I have regardless).
Again, you're right - it's not necessary. But some people feel it is. It's great that you can be content with no hard drive, a 60 gallon barrel of AA batteries, sitting huddled in the dining room. I admire that.
Me? I can't do it.
PS3 is cheaper... For me.