My 40Gb fat PS3 started freezing with blu-rays right after 3.40 update. After getting angry and mulling over the possibilities I decided to try and re-install 3.40 update. My original install was from network. It is possible to do a re-install through the safe-mode menu. You need to download the file from this site onto a USB thumb drive. Instructions are on the update download page (linked at the top of this forum). I did the re-install in safe mode, restarted my system, inserted a blu-ray game that had crashed before after only a few minutes, and proceeded to play for an hour with no issues at all. I will update after more testing but I am optimistic. It's an easy and free fix to try for anyone desperate for a solution.
Yep, it still works. My system worked perfectly before update and started failing after network update. After reading these forums, I was thinking the worst. After reinstalling the 3.40 update via safe mode, the problem disappeared. I hope some people will try this before doing anything extreme. From now on I will only update via download to USB storage media.