have you not tried the firmware update? maybe that will fix it, otherwise the PSP needs to be sent back to whoever you got it from - i dont know if you could send it to sony but i don't see why not (except it would take at least a couple of months to sort out)
if it was me (cos im a cheeky chap) id sell it on eBay and then buy a new one, i did it with my xbox when my modchip got a little old and incompatible with a few new games!
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