Is PlayStation 3 online good quality and reliable?

May be...

If I plugged my modem straight into the PlayStation 3 would it be smooth, unlaggy and super reliable?

It all really depends on your modem, as well as the game. If you want a fun shooter that doesnt lag, get Killzone 2. best shooter out there, and i never had a lag problem that wasnt due to my houses internet being broken. also, Resistance 2 is a game that has dedicated servers that wont kick you out. so yeah, it should work great for all the games, but some more than others, due to the developer's server dedication.

For the most part your connection will be great. If you plug your playstation 3 into the modem, look under network settings for details on your connection strength and status. If your ps3 has technical difficulties, or your modem does, I would suggest a wireless connection

Depends on how well your connection is, but the the PS3 itself does not lag at all unless your connection isn't very good. Online play varies, even if you have the best connection available you may lag if someone your playing with/against has a bad connection.

I've never had a problem with it playing multiplayer or downloading anything.

PS3 lags less than most other game consoles.