It is indeed possible to create ISOs from PS1/PS2/PS3 discs, and it is indeed possible to install them on the PS3's internal hard drive. The end result, of course, is not what you'd like it to be - ie making it possible for you to pirate games and play them off the PS3's hard drive.
Well, that depends. Most PS1 and PS2 ISOs are smaller than 4GB in size, which means you can just throw them onto the hard drive. Most PS3 ISOs are significantly larger in size, which means you'll have to either split them into compatible sizes or rip the contents of the ISO (and not the ISO file itself) to the hard drive. (The difference being that the ISO file itself is massive, but the components of it probably aren't that big.)
That said, even that won't allow you to play pirated games on the PS3. In fact, the only thing you'd be doing is wasting hard drive space.
If you're looking to play PS2 games via external hard drive, then I'd first have to ask whether you have a backwards-compatible console or not.
Ah i already have been able to play ps2 games via external HDD on my PS3 for a while now, i just need a way to rip the iso from my discs then place them on the ext HDD
which i seem to be having trouble with as i dont know how to rip an iso out from the disc using PS3 SAK onto the EXT HDD, could u give me a step by step on this?
You don't need to use Swiss Army Knife at all (if that's what you're talking about).
The PS3 trick using Swap Magic is very much the same as the PS2 trick using Swap Magic. You have to use some program (PSUtil or some such thing) to separate the ISO into multiple 1GB "parts," which can then be stored onto a flash drive without the worry of the 4GB limit.
You'll probably have more luck getting answers to this by asking around in the PS2 forums, though. I tried this a while back and, to be frank, I thought it was pretty lame. So I don't remember much about what programs to use and how to go about things.
well the reason why i wanted to use swiss army knife is because i dont have a CD/DVD reader as i only have a Netbook, and i wanted to be able to save money from having to buy a disc reader by using SAK as a ISO maker
Fair enough, fair enough. But I'd still go ahead and ask in the PS2 forums, as they actually know the software that goes with Swap Magic and the USB Advance stuff.