The demo PS2 units in stores (with the LCD monitor) is actually not VGA, but regular ntsc video. The picture is actually quite blurry in my opinion.
The PS2 does have a component connector, but its just so you can play in 480i (15khz). The only upside to using the component cable is its sharper than svideo.
As of right now there are no PS2 games which support resolutions above 480i. The rumor is Tekken4 will support 480p, but that is pushing it as the PS2 hardware can't buffer than much video info.
-Dave