Don't give up hope just yet... have you tried formatting the memory stick?
Power on your PSP with the memory stick in it, but no UMD game. In the options screen, highlight "Settings" (the icon looks like a toolbox), then "System Settings" (PSP with a wrench next to it), then "Format Memory Stick". Press X, then confirm that you want the stick formatted. You'll lose all the data on your stick, but it should become usable.
JR
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