I rest my case . . . =) . . . they force everyone to learn how to rip DVD's in order to do just what you want to do . . . watch what you paid for where you want to watch it. They have forced ppl to get the knowledge required.
I would work with the standard DVD since the PSP doesn't support HD (could be wrong on that) and the SD is smaller to convert to the PSP format.

I downloaded DVDFAB and it has a file to mobile option - converting a .wmv as I type. I will let you know how it goes.

Converted the file but on playback its all gibberish. Going to try to convert from the DVD next.

Yeah trying to convert the digital video copies is a mess. It usually doesn't work. You're better off just ripping the DVD.

Might wanna correct the typo right after Ray :)
I like handbrake for video convertion.[url=]http://handbrake.fr/[/url]

I convert videos weekly with VirtualDub and never I have run into problems until I tried to convert stuff for my PSP. The PSP seems be awfully stubborn when it comes to supported audio and video codecs.
What did end up working for me was "PSP Video converter" of some sorts, I can't remember the full name anymore.
You could try using settings like these, which are from a video that works on a PSP:
AUDIO
Codec mp4a: MPEG-4 AAC LC
Info 48000Hz 64 kb/s tot , stereo (2/0)
VIDEO
Codec avc1
Framerate 29.971
Overall
MSNV: MPEG-4 (.MP4) for SonyPSP
- isom: MP4 Base Media v1 [IS0 14496-12:2003]
- mp42: MP4 v2 [ISO 14496-14]
Recommended Display Size: 426 x 240
Resolutions like 320x240 seem to work fine, but you might want to strive for the original PSP resolution of 480x272, although the codec says 426x240 might be some sort of maximum res.
This is all too blurry anyway, someone should come up with a working guide for VirtualDub.

Thanks for all the input - DVDFab work flawlessly from the DVD. Looks like I have a keeper and will be purchasing it on payday. Really annoys me to have to go through all these hoops but what can you do. And now we have a third party software industry thriving on the fact that the Movie Industry just will not give me the video in the format I desire. Thanks again to all of you.

Glad to hear it worked for you, just remember, DVDFab is updated every 6-8 weeks so you will need to download - uninstall - reinstall occasionally. It uninstalls easily with no restart so . .
What is sad is that you had to pay a premium for the multi-pack and it still would not work. . . =(

Worked fine for me.

I hope you guys know the best/easiest to use/most comprehensive converter out there is Mobile Media Converter: http://www.miksoft.net/mobileMediaConverter.htm
It relies on codecs installed on your computer though. If you want MMC to deal DivX, you must have DivX installed on your machine. My hint is to find a good codec pack (I can't name mine because I don't remember the name...)

CCCP (Combined Community Codec Pack) had a pretty good reputation last I checked. Granted, it as a while ago since I nowadays just install the codecs I actually find out that I need (ie. when a file won't play I check what codec it needs, and install that, or I simply run it through VLC though that solution won't help here).
Oh, and I use MediaCoder for my conversion needs. There, another opinion added to the pile.