you need the card in the psp to link up via usb to add files
if its stuck in but has made a connection you should still be able to use it, although if its too big it is probably a fake, where did you buy it?
send it back if you can, get a new one
theres no reason for it to be too big my sandisk 512mb is clear plastic and the flash memory chip only takes up half the space inside the case. the stick is only that big so you can hold it
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