The PS2 internally renders in RGB and converts to the YUV color space when using component cables. Apparantly only the launch model (fat) PS2 is able to convert RGB to YUV without some degradation in image quality. Later models, especially the slim SKU’s, have noticeable more noise with component cables compared to RGB cables. I have seen pictures of this in another forums plus mentions elsehwere. This is why I’d prefer using RGB connection. RGB is also more convenient to use since both video and lead goes through the same connector whereas I have to fiddle with separate audio and video cables for component.
That said, I haven’t been able to establish any difference in my set up since my RGB has some some problems with 480p and higher resolutions. Since I haven’t heard of anyone else having these problems I assume I need to buy a higher quality RGB cable.