Does the PS3 produce better playback when it has more HDD space?

It really shouldn't make a difference when actually watching a movie. It may help load times on BDs, but it doesn't use the HDD when playing back a BD. It loads the software into RAM, then reads the movie off the disc. Once it copies the playback software into RAM from the HDD, all should be the same. Even if it did make a difference, 10GB is a huge amount and would still be more than enough to affect anything. It definitely wouldn't change how the end video looks, if it did cause a problem it would be slow and jerky, not less clear or vivid. The data decompresses to the same pixels for output regardless.