According to one source, emulation of PS1 and PS2 games on the PS4 is right around the corner. They could carry HD enhancements if all goes according to plan. Reportedly, the PS3’s firmware contains emulators for PS1, PS2, and the PSP and the Vita handheld is capable of running PS1 emulators using the same technology. Sony is apparently pursuing the ability for older titles to run with less blur than seen on PS3 emulation and may be as successful as resolution seen on PCs emulating Sony’s consoles.
Running the code locally would provide a far better experience in terms of both input latency and image quality and a single download could actually work better and be more economical. This, however, as one source noted, would mean that anything running on the PS3 can also operate on the PlayStation Now servers and so there would be no technical reason why PS1, PS2, and PSP titles running on the existing and upscaled PS3 emulators couldn’t be added to the streaming service if Sony decided they want to go that route.
When testing Gran Turismo 4 on a PC emulation at full speed it was shown that basically not every PS1 or PS2 game will scale up to 1080p quite as well and won’t have the same beautiful results when running on the PS4.