The legality of homebrew for PSP, or emulators in general has been a widely debated issue and I don't think it will ever be resolved.
Of corse, emulators are developed legally from a coders bare hands but the intention of said program is to run illegal material (with some exceptions). Now we are in the era of full ISO's for games on PSP (which I strongly DISAGREE with). Then we get into Custom Firmwares which are in essence, streamlined exclusively to play illegal material such as ISO's which IS wrong. So I believe as long as it is kept legal (ie; DevHook UMD) there should be no problems or random suing ;)
DCEmu FOREVER!!!