I also have an HDTV and a PS3. I tried all the different hookups and the hdmi hookup is by far the best!! It was night and day difference compared to regular av cables. Much clearer video and crisper audio. I would suggest buying it. Plus there would be less cables in the way since its all in one cable. Hope this helps!
Definitely go with the HDMI cable. Like Dustin said, the video and audio are far superior going that route. As just a side note, you don't have to buy an HDMI cable that is specific to the PS3, any good quality HDMI cable will do the job.
You can't make 480p look like 1080i, that makes no sense. They are completely different resolutions.
On a lighter note, you can use any HDMI cable for the PS3, I have both the PS3 version and a $5 HDMI cable and the quality is identical. You don't have to have the HDMI cable to use the PS3 though, you can use composite (only supports up to 480p, it's the standard red, yellow and white) component or HDMI, both support up to 1080p but some component cables only support 720p. HDMI is the way to go if you can.
Digital signals are all 1s and 0s. So there is NO difference in HDMI cables. Go to Monoprice - they have BY FAR the BEST HDMI cables for the LEAST amount of money. You can get a 6 ft. 1.3a HDMI cable for $6. Professional installers use them on $100,000 systems, and I've used them for years with excellent results!