So I just grabbed a ps3 to of course play the new grand theft auto…one minor hiccup is that I have an old-cheap tv that only has mono sound. How do I tell my PS3 that I want mono output? The settings in the sound menu do not appear to make reference to mono?
You need one of these
Or one of these. Heck with the mono TV. 
follow-up question…
mono-tv + stereo speakers = stereo sound? i.e. if I went from the mini-jack to a mixer (which I have for my turntables) and plugged in studio monitors.
Yes, exactly that. I output my 360 to a home theater receiver and get surround, though you need a digital audio connection to get that. But, yes, you can hook up your PS3 to a stereo and rock the house.