Now that the PSP has been out for a week, many industrious people with too much time on their hands have been poking and prodding the system to see just exactly what it can do.
One of the projects has been to get the PSP to play mpeg4 files, and to compress the files to a reasonable size while retaining a high level of quality. In fact, in just one week, people are easily fitting up to two hours of video on a 512 meg card. It's even possible to rip and convert your own DVD's and put them on a card.
With the cost of a 512MB card still up around $100, and 1GB cards being nearly impossible to find, it will be awhile before this catches on with the masses, but at least we now know it's possible. I'll have a full report on the process and the results tomorrow, when I tell you about my experience with the PSP's mpeg4 playback.