Apr 8, 2007
I remember reading that the PSP was able to read AVC encoded files. At least since firmware 3.30. If you have that firmware, you should be able to just put it on a memory stick and watch it. I don't have a PSP, so I don't know if it has a problem with the aspect ratio or what it does with that.
Apr 9, 2007
Here's a link to PSP Fanboy where they have the home video all ready to put onto your PSP, this one alse contains the video for Little Big Planet