Been playing about with Ubuntu 8.10 on the PS3 myself. It's the only version of linux I got to do everything it is supposed to be able to do. Adobe haven't released a standalone installer for Flash running on the PPC in 64 bit yet. YouTube does work fine through the PS3's built in web browser though. Linux it's self is quite limited in some ways. There is no direct video driver so use of 3d rendering is out the window, the 256mb of RAM in the PS3 makes Ubuntu behave slightly slow and configuration of the monitor can be a bit of a pain (still haven't gotten my S2409 to display it's native resoloution but the Samsung 245b is fine).
Beyond that there are a lot of PC features you can do with the PS3. FireFox is built into Ubuntu so you can use all different websites (some sites don't work correctly in the PS3's web browser). There's an IM client called Pigeon that will communicate with MSN, AIM, Google talk, Yahoo Messenger and a few more. It copes with SD quality movies just fine but 720p and higher is out of the question. you can also remote connect to a Windows PC from the PS3 and vice versa.
It's handy to have at times where you really need a second machine for some basic things, but it is in no way advanced enough to use as a desktop replacement.