Message From Retro the dude from the PSP_Assult Video Series
According to Ookm the purpose of flash_fatfmt.prx is intended to setup and partition the PSP's internal flash.
Having taken a look in to the matter myself it appears that there is a security change in this module that would prevent unsigned code from executing kernel calls to the 3.01 flash, - Meaning, (Only Signed Sony Updates can write to flash)
The good news with this is that in the event of an exploit, the 3.0 flash can still be modified
The Problem, downgrading 3.01 is going to be a challenge unless flash_fatfmt.prx is in someway bypassed.
via Retro'