I've been looking at the support forums for PSP hacking and custom firmwares and have discovered that firmware 3.02 has been hacked by a guy called Dark-AleX and will do everything that the UP chip with the Epsilon Bios can do, plus it allows you to run PSX games via the PSP's PSX emulator.
And even better news is that this custom firmware has now been updated again to version 3.02 OE-B by Dark-AleX and it allows you to convert any PSX ISO into the correct format and will work with the PSX emulator. You do don't need to wait for Sony to release PSX games for the PSP, you can now convert your own PSX ISOs and run them.
This seems too good to be true. I'm so tempted to flash my PSP to this custom firmware, but first I want to read a bit more from people using this custom firmware, and also from those with UP chips using it.