During boot up the PS3 pulls data from the hdd that is shown on the XMB such as icons, photos, music, theme, etc. The PS3 uses a boot loader (similar to how a PC has a BIOS, which boots the OS) The BIOS is on the NAND and the OS is on the hdd. But in the PS3's case the BIOS when flashed with firmware stores information about the version. So I would say it's impossible to downgrade the PS3 by altering the hdd. The UPDATE.pup file would need to be properly built to trick the system into downgrading. Or a hardware based hack or re-flash of the NAND would need to be done.