Hello again all,
I have managed to resolve the issue I had. It seems that no amount of system formatting will ever solve the issue. It just keeps hanging at the wavy line screen.
PC must be off when connecting/disconnecting the hard drives
What I did was I hooked up the 2.5" PS3 hdd internally to my PC motherboard.
Remember to remove the +12V (yellow wire) from the molex power connector
Just to be safe when hooking it up to the PC that is. (To disconnect the +12V yellow wire from the molex just use a sewing needle to let it out gently).
Then I used Winhex (I attached Winhex for you in this post, incase you are interested) and used the "clone disk" option to dump the PS3 60 GB hard drive contents to the PC. This effectively makes a perfect image file backup to the PC. The PS3 hard drive doesn't show in windows explorer, but it shows in winhex.
The PC shows the file size as 55.8 GB (60,011,642,880 bytes). It copies all of the PS3's hard drive sectors, regardless of how much space you have used/unused on it. So make sure you have enough space on your PC to save that image file! If your PS3 hdd is an 80 GB spec then it will copy over about 74.5 GB to your PC. If it is PS3 40 GB spec then it will be 37.25 GB saved to your PC and so on...
Anyway, afterwards I had disconnected the PS3 hdd from the PC and then hooked up the 3.5" 640GB Western Digital HDD to the PC.
remember to re-connect the +12V wire from the molex power connector
Then on the PC I run Winhex and go to File > Restore image. Then browsed for the PS3 image file backup.
remember to rename file extension of your PS3 backup image file to: .img
Go though all the prompts, say yes, and overwrite, etc.. Wait a while for it to transfer the PS3 image contents to the 3.5" hard drive...
Then when it is done, I took the 3.5" 640 GB hdd and hooked it up to the PS3 using the same setup mentioned on the original posting. When the PS3 powered on, it booted up! just like when I had my 60 GB inside and it is fully intact with everything I had! When checking the PS3 system info, it shows a capacity of 596 GB!
I hope this helps anyone who reads this and experienced the same issue with their 3.5" hard drive in the PS3. Or those who just plan to migrate their PS3 data to and from their PC to a bigger hdd, without doing the external drive backup method.
Thanks for letting me post here.