*nod* *nod* Should be on by default for an "open" mic like PSEye.
Not sure if it works well. I'll try tonight too when no one is in my office.
Will yell at someone.
EDIT: According to wiki: http://en.wikipedia.org/wiki/PlayStation_3_system_software
the feature was added in firmware 3.00 (Back in 1 September 2009)
Tried it at home. Works for me !
Echo was reduced noticeably. No echo for my regular volume.
If I pump up the volume further (until I hear some echo again), I'd need to recalibrate. Beyond certain point (i.e., super loud), it would not help anymore.