They could bring backward compatibility by emulating the EE in software mode (via the Cell of course)
http://www.siliconera.com/2009/06/29...ll-processors/
And that's the only official information at the moment, no "when" or even "if"...it's just there as a possibility.
uh..offtopic ...

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On-topic now

It's not THAT big.

"Only" 38804 MB ~ 38GB.
Source: a useless scene release by HR
I'm pretty sure the X360 release will have 4 discs. 5 is a possibility too if they do very little compression.