Atomix check out this link PSP Video 9. What you have to do is rip the file and convert it into MP4 format. You
probably need to have at least a 512 MB card in your PSP. It is possible to put small video clips on there with the stock 32MB card that comes with
the PSP.
I would recommend you also try avi to ts video converter which is free to download trial software.
I think this TS Video Converter software, you should try it, you should be very satisfied.