Basically, if you are buying the PS3 for Blu-ray first, then out of the box it is pretty much ready to go. If you have HDMI compatibility with your receiver, then it's just a single HDMI connection to your receiver, then on to your display. If you don't, then you will need whatever connection types you have available.
I use component video with digital optical audio and love it.
Across the board, those buying the PS3 for Blu-ray have been really happy.
The extra 100 bucks for the bigger drive + Motorstorm is, IMO, more than necessary to spend. Since PS3 uses industry standard SATA hard drives which are user installable, if you want more than 60GB then look for the biggest possible drive available. I think 120 or 160 is available aftermarket.
I am not, at all, the only one who has been nothing but satisfied with my PS3 as a Blu-ray player. Plus, the selection of movies is great, and going to only get better going into this holiday season.