It is obvious that their biggest fear is piracy. The UMD loaders and dumpers are what scared Sony into this frenzy. Sony breaks even on the PSP hardware. They make no money on the device itself. All their money comes from software and accessories (which is why it is hard to find a PSP value pack anymore).
This might be why they dissaprove of homebrew as well. They don't want any of their market swaying away from them to go play free games. I know this seems like they are being mean, but it's just business. The console was truly NEVER designed to run homebrew. The GAMES folder was for demos of upcoming products, but I think that the homebrew scare (from Sony's perspective) killed that idea until they get homebrew and hacking under control.
Now don't me wrong, I love playing SNES and Gameboy on my PSP, but if it comes down to homebrew or high quality content from Sony (demos and the such), I choose Sony, because that is what I bought this system for. I didn't even know about homebrew until after I upgraded to 2.0.
Please note, that recently I upgraded back up to 2.0 because I got tired of being unable to play the newest releases.
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