Emulation all the way for most games. I don't have the room for so many physical games. I grew up in Europe too, so pal versions of games prior to the later ps2 era all play slowly with a few exceptions, the pal versions of games were inferior in every way. Gundam battle assault 2 literally had music that played 25% slower than the US version, they couldn't be bothered to fix it up properly for an EU release.
There's only really macross 30 on the ps3 that I keep as a physical game to play on the actual hardware. It can only truly be experienced on the disc on actual hardware, as even running the disc image on the ps3 drops the framerate to 10-15 fps, whereas on disc on a ps3, smooth 60 fps 99% of the time. It also doesn't emulate that well either, it's one of those games that needs to be played on OG hardware. One of the few games that was truly optimised for the ps3 that didn't have at some point either severe screen tearing, extremely slow loading or constant frame rate drops.
Outside of this one instance though, I emulate everything unless it's on my steam account or my psn account to download onto my ps5.
I am almost all digital simply out of convenience. I do, however, have a 4k blu ray collection of the few movies I love as streaming is far from the best quality and so is compressed MKV files.
I do make exceptions for some games, sentimental value etc. but I like way too any games to have them physically and play them on their consoles.