Could there be an issue with the new update that's causing this?
It's hard to say. You might be the only one with this issue. That is very unlikely though. Now that you restored default settings, you could try to back up your saved game data, delete that, and try to launch the game. I'm running out of options.
When starting up the game, I noticed the screen telling me "No Signal" as this actually had the PlayStation 3 sign my system out of the network while booting up the game. Soon enough though the signal actually came back up and started loading the PlayStation 2's startup logo and the game beyond that. I'm not sure what to say other than maybe give the game some wait time to see if it loads. If that doesn't work, do you know anyone else who has a PlayStation 3? Perhaps you could download the game to a friend's system and try it out there?
The waiting time was about... maybe a few seconds. I'm not sure if the same occurrence will happen on your end though. This might not be a common issue, which is why it would be difficult to pin down a solid answer. So, as suggested, try waiting longer than you have been (in case you haven't), and if that doesn't work then try seeing if the game will play on someone else's system. Hopefully something can be figured out.