I'm contemplating getting myself a PSP 3000 but I want to mod it so I can run ScummVM and copy the PS1 games I already have and use them on it (If for no reason other than almost none of my games are available on the psn store).
Is there anything I need to be aware of when running the third party firmware or any important tricks to upgrading it?

It's very easy once you've gotten past the hurdle of hacking it. I paid $80 of my funny money to some guy to do it for me, so I didn't have to live with the fear that I'd brick it.
Third party firmware is basically Sony firmware from an alternate universe (where the normal firmware doesn't SUCK), with its extra features and whatnot. Upgrading it isn't a problem, because there hasn't been an update in over a year. Once you do though, the coder that codes these things together actually found a way to update custom firmware using the Network Update feature. Results may vary, and you don't want to accidentally end up with a bricked system, so I suggest doing it the old fashioned way, upgrading via USB cable and such.
Also, Sony has blocked access to the PSP's PSN store if you have custom firmware. Ridiculous, seeing as the only people who'd use it are those who want to BUY THINGS. You know, with MONEY.
Anything specific you'd like to know about custom firmware? I myself have a PSP 1000 (actually, it's a 1006) in white with a lovely 5.00 M33-6 firmware.

From what i remember u might need a Pandora Battery (if your going to do it yourself). But things might of changed since i sold my PSP a year ago.

Yeah, definitely double check. I have a PSP 2k and got CFW pretty easily, but from what I understand, the PSP 3k does NOT actually have real CFW.
There are a few exploits (I won't mention them, since they are less than legal :p), but I don't know exactly how much you can do, or how permanent the exploits are (from what I understand, firmware updates tend to disable them).

For my fat PSP - I used these instructions [url=]http://www.psp-hacks.com/forums/f133/the-hack-your-psp-mega-thread-t227349/[/url] The problem with this is it is based on 5.00 and not compatible with newest games. I would like to buy persona later this month, but since it probably will need 5.51 it might be awhile before I get it. I have seen mentions of other CFW flavors which do 5.51; but I am not familiar with them.

The psp 3000 can be hacked fine, using the chickHEN homebrew loader, without the need for any hardware like a pandora battery. Unfortunately, the 5.5 firmware hasn't been hacked for the psp 3000 or some of the later 2000s yet. If you're only running scummvm and PS1 games on it though, that shouldn't be an issue for you.

I think I want to buy a PSPgo next year, it's just so compact and it looks really comfy, plus I'm now a believer of digital delivery. I already have a hacked PSP 2000 but I messed up the firmware, and the screen is messed up. I'll upload a pic later.
I'd still want to keep it around though because there are a few interesting fan translation projects of Japanese-only PSP games.

Well thats good to know. What limitations are there on running commercial games with lower firmware? Half the reason I want a PSP is to get GTA Chinatown Wars but if that ddemands an update before I can play it, there's not much point

I have a sneaking suspicion that Chinatown Wars will require 6.00 firmware, and seeing as the official unofficial firmware is still on 5.00, you may need to use the unproven, untested unofficial unofficial custom firmware instead. YMMV.

Is it really that worth it? Fiddling around with the firmware, following scene updates and whatnot, flashing your system over and over again, just to maybe be able to play some games for free? Contrastingly to a genuine unit where you buy the few games you really like and everything works perfectly without doing any of that?
As I grow old I really realize that it's absolutely not worth it. No ressources are ever any more precious than time and convenience.
The PSP is being pirated to hell and back, and I hardly believe that anyone who flashes the firmware does this to "back up his UMD collection to reduce load times with the memory stick". With games sold on PSN and loaded directly from flash memory that argument becomes moot. I really wouldn't mind if CFW functionalities just went away, Sony has made a formidable platform that is getting shunned by a lot of developers because of this whole thing.

I can't agree more mate, the simple fact of the matter is that the default PSP is not capable of everything I want. There's 3-4 games I want for it but the real draw is the ability to conveniently replay my old PS1 games and use stuff like scummVM
Frankly I don't really want to piss about with UMD discs but since they show no signs of releasing the back catalogue as digital downloads that means I have no other way to get Warhammer 40000 Squad Command which is one of the 2 primary reasons I want it in the first place. Unfortunately this same lack of interest in their past titles extends equally to PS1 games, having had a look at the PSN store, not ONE of the PS1 games I have is available for repurchase
I have no interest in using pirated games, although having said that in a way thats exactly what I want to do with my PS1 titles, copy them and use them on the device without paying an additional fee. If Sony released a tool (or even SOLD one) that could copy PS1 games, apply some sort of unique code to them and make them playable to only your PSN account then I'd happily buy it, convert my dozen or so games and say "well fuck it, my PDA runs ScummVM well enough". It seems that they'd prefer to try and squeeze people for individual games which, whist somewhat objectionable, wouldn't be THAT bad if only they had the entire (or the majority of) catalogue available

I can't speak for the majority but I can speak for my self I have never played a pirated game on my hacked PSP every one has been a PSP game that I bought legally and made my own ISOs. Now, one observation for all those who say the PSN is the WAY - you are limitted to installing you PSN downloads on 5 different machines and then you are stuck. 5 is of course not bad number, but as with any limitted activation technology the potential exists that you will not be able to play a game your legally bought in a few years unless you buy another license. I consider this unacceptable; particualarly if I am paying 30-40 for a new game.

How realistic is it to run out of PSPs to put your games onto? Especially since you can deactivate the games from specific pieces of hardware.
I find this to be nitpicking. Sony so far has been really cool with regards to DRM. And sorry but we won't live long enough for this to ever be a problem.
I think that even the pricing argument is moot. You won't be subjected to prices that high just because the games can only be bought from a single source. One just needs to peruse the PSP section on PSN to discover that the average price of most games is pretty low, and in some cases very low. In truth, PSP games compete against other forms of entertainment, and other games on other platforms.
The more I look at it, the more I like it. Screw the parasitic middleman, the money goes straight to the editor instead of GameStop, Wal-Mart and the shipping company. No boxes that clutter up the limited space you have. Protection against theft.

At the rate that new versions of the PSP are coming out (and the record of the Gameboys), I can easily see five machines being reached if the PSP doesn't die out.
And how have they been cool with regard to DRM? They use the exact same model that everyone else uses. Well, to be fair, I don't know what model XBOX Live uses, but whatever.
Price argument: That is the current pricing scheme. But Sony wants to go to almost a purely digital distribution route. So time will tell.
Just felt like refuting that.

XBL uses a 2 layered system. Anything you buy is tied to the console ID you bought it on and to your gamertag. Anyone using the console you bought it on can play the game with their own gamertag and if you take the game with you on a memory card or hard drive to another console, you can still play it as long as your gamertag is signed in.
Its rather a good system really, they even have a system in place to transfer licences from one console ID to another if you replace your 360. Never used it but it s nice to know its there.