Im from the UK, why on earth are sony only selling a 40gb version PS3 which does not play PS2 games??????

May be...

Because they want you to buy new, more expensive games. And you will.

In June, they plan on releasing an 80 gb with full backward play compatibility. It's part of the MetalGearSolid 4 bundle. The downside is that they raised the price back up to $499.

Because poeple kept bitching about the price.