Believe it or not, the backcompat in the 360 is done by a hugely modified version of "Virtual PC for Mac" (With all the unneeded bits ripped out, and hand optimising the important sections)
Dosbox on a 3GHz PC runs like a slug, much slower than a 733MHz PC would run the same program (I tried duke nukem 3D; it was pretty much unplayable on my PC from 2005; my PC from 1997 ran the game way faster).
If it's a per instruction emulator then they are incredibly slow, however there are other methods which have been around for some time. The transmeta processors could run x86 code at reasonable speed but internally they are not even remotely like x86 processors. Apple's PC Macs can run PPC binaries at close to real PPC speed. Both use a technique called binary translation which translates the binary to native code once.
In any case Iam still not convinced.. For starters, PS2 is more like a double, or triple processor, with those extra maths processors right?
If you translate their code to SPE then code this can be executed in parallel by the SPEs. The biggest problem I see is the 4MB embedded RAM, Cell can shift the data around fast enough but not that amount. However I don't even think that'll be a show stopper as once that 4MB is processed it needs to be stored and more data loaded, that's a process Cell can run rings around.
If something is really stubborn and can't be done in software they could always keep that feature in hardware and emulate the rest; if they can put that on the I/O chip that'll have much the same effect cost wise.
All over these forums. The general conscientious is that the PS3 reserves 32MB from system RAM and 64MB from video RAM (or its the other way around, I forget) while the 360 reserves 32MB total. The forum's search function seems to be broken ("no results found" for "ps3 os") but I'll try and hunt down the sources if they're absolutelly required.
Anyways, it's been mentioned to death around here. In case I am mistaken, I appoligize in advance.
Sure it could use a pagefile. It's already running a virtual memory system, it's just not backed by a pagefile. Once you have virtualized memory, adding a pagefile is straight forward.
Will Sony add it? I doubt it. It would mean that as a developer you could care a little less about memory, and that's probably not what Sony wants. It could mean lower quality titles.