it rips the game to the hard drive or external hard drive so you dont need the disc, and if you look around on torrent sites ps3 games are popping up everywhere on demonoid and funfile, and theres a seller on ebay selling the teensy boards with usb cable for about $100 delivered as i have ordered one a few hours ago :-) there really easy to program/flash, but yes the only drawback is when sony does the firmware update you have to wait for new firmware for the teensy board.
And from a fair bit of searching when able to play online there has been no problems yet, but im sure sony will find a way to detect non original games soon enough.
It was also recommended not to update to newer sony firmware yet as there is loads of problems with it, but if playing online you have to which sucks.