PS1 games flicker on PS3?

I recently bought a 60GB PS3 and updated its firmware to version 1.90.
So far, I've been really satisfied with the system, except for one aspect.
When I play my old PS1 games (for example, Final Fantasy Origins), I
notice considerable flickering as the display moves across the screen.
This only occurs when the "Smoothing" option is set to "Off." However, I
don't really like "Smoothing" to be on, because it makes the picture
appear too "soft" and hazy for my liking.

My PS3 is hooked up to my 25" Sony Wega SDTV via S-video.

Is this flickering of PS1 games (when "Smoothing" is set to off) a result
of the PS3's built-in upscaler? Would getting an HDTV (something I've
been considering) help fix this issue?

Thanks.