There are some great games for the amiga.
If your into strategy, settlers and dune II are real good
Racing games, then skidmarks 2
Adventure , simon the sorcerr and monkey island series
Your right however, it wouldn't be worth spending the money to update the machine, though a hard drive would be a good, cheap investment, u can then get whdload or jst to put alot of game to HDD and make them compatible with the A1200
As to the PS2, gamecube argument.
I have played both alot. The graphics on the gamecube are alot clearer and not blurred like PS2(propbably something to do with ATI doing the graphics chips in the GG)
The dvd player on a PS2 aint all its cracked up to be, some titles dont work, dont work properly etc.
U cant play videoCD on them
give ur missus a good backhander

(only joking)
and get a gamecube, much more fun games