
I you have a large memory stick, then it has room to store more than one film. Trouble is, you have to do the conversion yourself from a DVD or recorded TV, on a laptop. For this reason, this aspect will not take over the portable DVD market.
The other way is simply to buy the film on the UMD format for the PSP. Because people will resent buying the film twice I think this will be a niche market, not take over.
Judged as a display, a PSP film is better than many portable DVD players, so if you have the tech knowledge and can be bothered, then some people with a PSP who are about to buy a portable DVD will not do so because of method 1, but such people will be very few, I suspect.