Wanted to test this before I said 'no, it doesn't' (maybe it was added in a firmware update since I last tried), and it still doesn't do that. At least not when going 'down' from an HDMI output to an S-Video or Composite (Red/White/Yellow) output. When you go from SD-out to HDMI-out, it will automatically detect if you have an HDMI cable plugged in.
Otherwise: Hold the Power-On button on the PS3 system itself until it beeps a second time. You'll get the normal 'on' beep, and then after maybe 10 seconds you'll hear the 2nd beep. You can let go then. This resets the system's visual settings to their lowest/factory default value. It should then work.