Here is one of the easiest way to convert videos into Mp4 PSP format. As you know, PSP supports MP4 format videos, so if you have any avi, mpeg or other movie video formats and you want to convert it to PSP MP4 format then try out this torrent client, which is popularly known as Vuze (Azureus).
The process to create PSP mp4 videos is pretty much simplified with the latest Vuze client (note that this is a torrent client). Once you’ve Vuze installed on your computer (download from here) you can watch and convert quality video trailers or music videos instantly into Mp4 PSP format.
Firstly, attach your PSP to the PC (also works with PSP 3000 and PSP 3004) using a USB cable and make sure vuze is running in the background. Vuze will automatically detect the PSP and will list it under ‘Devices’ options.
Now drag and drop any music video or DVD movie videos you want to convert to Mp4 format for your PSP and wait for the conversion to be processed, open the folder (use right click –> show in explorer) and copy the converted MP4 video in your video folder of the PSP.
It’s quick and free to convert any number of videos to PSP format 
Result: I didn’t find options to change the bit rate and the converted video didn’t have a full screen resolution, however, a 60mb music video was quickly converted to 23mb with a good quality output video which was one of the advantage!
