It doesn't matter if you have the 20GB, 60GB, or even the new 80GB Play Station 3--you can always use more storage space.
All that available hard-disk space quickly disappears once you start downloading games, demos, and HD videos.
PS3 system had no trouble copying and running from drive. Because it has attracted low-quality or spam answers that had to be removed, posting an answer now requires 10 reputation on this site (the association bonus does not count).
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If you still want to make the drive useful, you can buy an external drive enclosure to make it into a portable storage device.
On Christmas Day 2010 my PS3 stopped reading discs so I bought a new one, took the hard drive out of the old one, wiped/formatted it and used it as a portable hard drive.
If your storage device isn't large enough to handle a full system backup, you can selectively copy data over through the various music, photo, and game menus in the XMB.
But today I've found a possible fix to get my old one working again.
If I wipe the hard drive and stick it back in, will it work?
Your Play Station Network login and system settings will remain safe on the system during the entire process.
After you have your data safely backed up, you can move on to the actual hard-drive swap.
For those ill-affected by last week's patch, Sony has published a step-by-step guide to install the new firmware in your PS3's hidden safe mode.