I just have my PS2 slim hooked to an hd tv( normally outputs 1080p) w/ component and the image looks perfectly fine, but it can be blurry depending on the game that's being played. There are some games that support 480p , and an extremely small amount that support 1080i.
Now it is possible to use a program called GSM( loaded on a memory card), to force the console to ouput different resolutions such as 480p, VGA, 720p, 1080i ( 1080p can be done only through programming). However, the problem is that outputing these games at a resolution ( to what they were intended) may cause disortion in the image especially if you are doing 720p and 1080i. The only other alternative is Xploder, which costs a bit of money, or to use a BC PS3 which has options to upscale resolutions w/ correct aspect ratio and has smoothing options for games( but the system requires manadatory cleaning and thermal paste adjustments so that the system doesn't die too soon).