If Santa brings me a PSP for Christmas, I might consider purchasing this device (depending on how much of a hassle it is to get movies to the PSP via conventional methods). The Neuros MPEG4 Recorder 2 is a recorder that creates the appropriate video file straight from the content. It's basically a VCR without the tape since it records to your memory card. You can connect it to your cable box, DVR, VCR, DVD, camcorder, etc. and it will record to your memory card which can then immediately work with your PSP or any other device that is compatible with a memory stick or CF card (like my Dell Axim x50).
It can record in VGA, QVGA, and WQVGA. You can purchase it for $149.99.