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In the XMB you have an option under settings/game settings for PS Upscaler and PS Smoothing. PS Upscaler will upscale the 480i image to whatever is set as your system's maximum resolution (be it 480p,720p, 1080i, or 1080p), and PS Smoothing will run some low AA over the image. Smoothing can also be toggled within the menu while you're playing a PS1 game.
The main thing to remember when you're upscaling PS1 games though is that you're upscaling PS1 games, so there isn't a lot you can do to make them pretty.
Also, upscaling and texture smoothing are only going to show a visible difference with polygon models, 2D backgrounds (like those in FFVIII), FMV, and stuff like that won't really show much if any improvement.
I remember I could never ever get it to fucking work
PSN ID : DetectiveOlivaw | TWITTER | SCREENED | STEAM ID | BUY SOME STUFF!
I know! I tried playing RE on it but it never seemed to show the video for me. I could hear the sound effects, however.
Also... wound up getting MGS4. I couldn't resist. I like that it has a virtual shooting gallery (or whatever they call it) so that I can kill a little bit of time without investing in the story (I have tests this week!). And I'm weighing a second game option now: I got the demos for Infamous and Killzone 2 and am leaning towards the former, though I think I'll probably get Demon's Souls when all's said and done. Just updating in case anyone is still curious.
Edit: Might just save some cash for Force Unleashed 2, though. I really enjoyed the demo!