I'm on my 3rd unit and it finally seems to be working like intended.
On my first unit I got the famous "Scratching" of the disc. (Note I had it Horizontal too, not vertical). Sony replaced it with another unit. Unfortunitly the second unit suffered very very badly from DVD sync problems. I'm talking like 2 seconds worth.
Argh. 3rd time was the charm though everything works as sopposed to. Only exception being the DVD quality is sub par compared to my Sony DVP360 stand alone, but this makes sense because the PS2 is not just sopposed to be a "DVD player".
So far while there are some good games, I havn't been overally thriled with my purchase. Can't wait for GT3 though.