IMHO, the 'problem' with this thread is semantics; you're debating the wrong topic. There's no way Sony would want to take on Windows head-on, why would you want to? The question should not be can the PS3 replace the PC; but, rather, can the PS3 provide enough functionality to make the PC redundant?
And to that, my answer is yes. When you look at the set of functions I use my PC for at home, it's basically net-browsing (Firefox), email (Thunderbird) and music (SonicStage|Connect). I see no reason the PlayStation3 can't support these functions more than adequately, especially on a 1080i/p HDTV. I have a few applications that wouldn't cross over, Chicago uses FinchTV & Chromas for example. But the point of my laptop isn't for work related tasks, so this is outside of what I would expect a PS3 to run.
In closing, it was the threat of a PlayStation2 with an LCD screen, Linux and TimeWarner|AOL supported web browsing subsidized by advertising revenues in 2000 during the dot-com boom that scared Microsoft into building consoles. I see no reason a PlayStation3 can't do what the former couldn't.
And sign a revenue sharing deal with Google for search, both of the media stored on the PlayStation3/Cell infrastructure and on the internet via PS3, just to piss off Microsoft.