That would be the assumption, yes. Eurogamer has some very interesting technical insights on the theory behind this patent:
http://www.eurogamer.net/articles/digitalfoundry-ps2-adaptor-patent-blog-entry
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The real challenge here is bandwidth. The PS3's USB ports are capable of transferring around 35 megabytes per second at their maximum throughput level - no way is this fast enough to host an entire console. The fact that the hub appears to be handling Ethernet traffic suggests that Sony's solution to the bandwidth issue is to use the gigabit network port on the rear of the unit.
This offers a 125 megabyte per second connection between the host console and the "removable adaptor". The theory is that the PS2 game disc is inserted into the PS3 with data from the drive combined with input from the controller(s) being beamed over the LAN port. The adaptor then decodes the data and processes it exactly as a PS2 would. The output data is then transmitted back to the PS3."
Sounds like a LOT of effort to get the data from either disc/HDD to the external hardware box and back, even before post-processing like upscaling. It'd look a lot like the 32x/Sega Cd looked when added to the base console if it went through the ethernet connection. Heck, even making a passthrough would look hideous, even if the connection was fast enough via ethernet.
So, here's all the box would theoretically have to do in order to have even RELATIVE interest:
1) Play all PS2 games that exist (if it's just repackages PS2 hardware, as the diagram insinuates, this would be a given)
2) Have enhancement features that make it worth the purchase (upscaling to 1080p at a minimum, otherwise there's absolutely no benefit for this over a PS2 by itself)
3) Actually work
4) Not look absolutely hideous in terms of connection to the main system (let's face it: people treat the PS3 like a media center more than any other system these days, so it's gotta have clean wiring and at least SOME redeeming visual aesthetic)
5) launched at a price point competitive to the PS2 solo unit (essentially cannibalizing their own product line but this needs to be priced to encourage a prospective PS2 system buyer to buy a PS3 with PS2-compatibility adapter instead)
Since it's just a patent, I'm not sure how hopeful I would be about a product actually coming to market based on the idea. It is a very interesting idea for sure, though, but seeing how things like the GoW PS3 collection, and the recently announced revamps of Ico/SotC have good profitability...