Dark AleX has posted that he hopes to commence work on 3.03OEA custom Firmware soon and will be finished within a day! (Provided there are no problems I guess)
The following is taken from a post regarding psx2psp V 0.6
"There is a problem with the application.
The iso header offset currently MUST BE 0x50000, since one of the functions of popcorn that replaces a popsman function (to allow decrpted headers) will search the postheader at 0x50400, where are data needed by pops.prx.
I've seen than the appplication does not always generate the data there, and this could cause the generated pbp not to work properly.
In fact, this was one of the reasons of popstation to not allow big images.
Anyways this will be fixed in popcorn.prx of 3.03 OE-A by searching the iso offset in the pbp header, but currently in 3.02OE-B, isos whose header are not at 0x50000 cannot be guaranteed to work.
In fact they could work depending of the luck of the values of the data that are at offset 0x50400+.
No need to change nothing in the app anyways, since i may start working in 3.03 OE tomorrow, and it should be ready next day."
Looks like the next release will support psx compressed ISO's! (Thanks jak66)