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Ubuntu is good, though it doesn't work so well on a SDTV, boxes appearing off screen etc (though that's the same problem for any OtherOS).
In regards to formatting, what I did was to go to the game OS, plug in my external hard drive, choose the backup tool (which backs up all ps3 contents: demos, save data, music, pictures, video, though not messages), then to choose "allocate all to ps3" under formatting. this clears the HD of everything (even the linux partition), leaving you to restore your backup. It could take a while depending on how many videos/demos you have, but that's the way I've got it working.
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