Great News! I just got UDF 2.5 support to work on my PS3, here is quick couple of screen captures. I'm going to reproduce what I did and create another guide hopefully but the end of the night. (Screen capture aided)
Soon after I will combine it with the install VLC guide posted by another user, and combine it with my "Comprehensive Guide: Blu-ray back-up and Decryption via PS3"; This makes the entire process do-able on the PS3 alone. (HD-DVD's here I come)
I'm not posting the guide until I know its reproducable. The file will be zipped and located here the guide is produced.
If you are using an updated kernel (> 2.6.16, Trust me you would know) other than the one that came with YDL attempt this at your own risk. Currently I should be able to compress the files down to about 75 MB. PS3News how is that? ALSO I am going to add support for NTFS writing, and don't forget to back up anything important on the PS3 Linux just in case.