zrns, there will be a seperate usb port to connect the modchip flash to the pc. The psp won't need to be on: the modchip gets power to reflash from the usb connection. software will re-flash the PSP.
And if you hadn't realised, you need to take the battery out anyway to get access to the port underneath for reflashing, not to be rude but most of your questions can be answered if you read the thread more closely... :D