Ah, they are creating two violations in one go..
First off, you're changing a sold, documented feature of a device without permission of the owner (I don't want the upgrade) under duress (you potentially won't be able to watch newer Blueray titles). AFAIK there are some questions here that could hit (a) the Trade Descriptions Act as we're talking about misleading consumers (it's the equivalent of selling someone a full stereo set and than disable the radio on remote) and (b) the Computer Misuse Act as this update is NOT doing things that are desired by the owners. The last one is harder because I bet you're asked to accept the license, but Sony's problem is that their announcement makes that acceptance "under duress" ("or you may not be able to watch future titles") which AFAIK invalidates it. You could also hit the Trade Descriptions Act in that nobody told you that in order to retain one functionality you'd have to disable another one - it means you're always going to be one short of the features you were sold.
Personally, I think the biggest brick is the Computer Misuse Act, because you are forced into an agreement under duress. That is blackmail, whatever explanation they may furnish, and the invalidates your apparent "agreement".
Imagine you buy a fully equipped car. You selected this model because the set is cheaper or more attractive. A few months later you will find that you cannot get your free annual service unless you allow the garage to change your alloys for steel rims. There, for those that need car analogies :-).
No, no, no, and no. I will not install this update. I bought the device for Bluray and games, but I like the idea of an alternate OS, even though I may never use it. The moment I can no longer access Blueray disks I vow to bring every law, violation and anything else I can find to bear on them. I'm not a thief, pirate or criminal so I'm not going to be treated like one.
BTW, did I mention this is the very last time a Sony device has ever made it past the doorstep? I don't want to have to worry about what they decide to disable later. Well done Sony, you may have saved the world from a couple of pirates, but you lost my complete household. May many follow until you finally get it into your thick heads that the only thing that really sells is a customer focused approach (and no, that doesn't mean I'll return as a customer - I have forgiven too much already).
Now, being the irritating sod I am, I called Consumer Direct, and they are going to brief Trading Standards. According to them, as the device post this update will no longer have all the features as sold you are in principle entitled to compensation - in the UK it will be considered as "no longer matching the description as at the time of purchase". The lady agreed that it was going to be a long haul to get it, but your first step should be to contact Sony in your country and ask for compensation. Do this in writing because you need to keep a track record for Trading Standards and a judge to act upon.
Anyone any idea how to get data on how you could nail them under the Computer Misuse Act?