The new PS3 firmware update released yesterday will allow you to watch YouTube, Hulu and other internet video content encoded in Flash. The system software version 2.53 includes full-screen mode for Flash Player in the browser. Recent updates (with 2.50 and 2.52) included power save and sequential playback settings, video scene search, and blu-ray chroma up-sampling.
An article from CNET for which they tested the update came to the conclusion that the update was not quite ready for full-screen mode. In their tests, both Hulu and YouTube video content was either choppy or missing video. Their test of full-screen mode also resulted in a crash while exiting the browser.
While the Flash support is a worthwhile feature, I can’t imagine downloading a 130Mb upgrade just to look at poor quality videos through your Playstation. My advice is just watch internet videos on your PC until there is a major improvement in quality.