The $500 model is in no way useless. Sure, most people use wireless Internet nowadays, but other than that - it can do anything the other model can. You can put in any SATA 2,5" HDD in the PS3, so you can put a 300 GB drive in there or whatever. The thing has USB ports, so you can insert any $5 card reader in there, no need for integrated ones. Oh yeah, you can use wifi USB dongles as well.
At this point, I think there are three different Linux distributions for the PS3. Of course, there are plenty of media players and stuff that works just fine on it.