How do i fix my psp in this situation?

You need to put it in the VIDEO folder but make sure that the VIDEO folder is not in the PSP folder. The best way is when you put all your saved file on the pc and then you format your PSP memory card. Then the VIDEO folder will be at the right place.
If the version of your psp is higher than 3.0, you just need to copy the converted files to the “Video” folder of you memory stick (if the “Video” folder doesn’t exist, manually create one).
I use aimersoft, it is able to convert dvds to psp mp4 movie, compatible with psp 3000 and previous versions.

Use a free Blu-ray Ripper software to ripping Blu-ray disc to PC, and then backup.

it can bypass all kind of dvd copyright protection schemes and save the movie to computer in psp mp4 format, keep the original video and audio quality
Here is a guide about how to use it.
You need to put it in the VIDEO folder but make sure that the VIDEO folder is not in the PSP folder. The best way is when you put all your saved file on the pc and then you format your PSP memory card. Then the VIDEO folder will be at the right place. BTW for games, you use ISO folder and you can download games
Good luck and I hope I helped

Video converter for Windows 7 is the easiest way to get your video in the format you want, convert video and audio to iPod, PSP, iPhone, Zune, Xbox.

You have to format your memory stick at first, then convert your dvd or video to mp4 video, copy the mp4 video to the "Video" folder in your psp memory stick, done. If you don't have the video folder, just create it by yourself. If you need detailed info, here is a guide would teach you how to convert and transfer video to PSP
Under PSP make a "VIDEO" folder or in MP_ROOT a "101MNV01" But there is already a "101ANV01" folder. I used handbrake so it should be te right format.
BTW for games, you use ISO folder and you can download games from
Buy or download software that Burns DVD's
Find a function that allows you to copy DVD
to Computer
Convert the file you get with some type of Video converter
to a format that youtube accepts.
Use Magic dvd ripper, it lets you have 5 rips free, select the chapter of the dvd to rip onto your computer if you know it.....mail me for the serial key if you like the ripper.......finally use the split tool in wins move maker to delete parts of the video you dont want.
DVD videos are encoded in DVD-video format, you can use aimersoft to convert the dvd video to regular video formats, like wmv for windows movie maker.

Provides five ways to rip Blu-ray DVD to PC, AVI, DVD, ISO, iPod, MP4, WMV, MPEG, DivX, etc.

aimersoft dvd ripper is able to trim the dvd video into video clips so you may also ignore windows movie maker
I think the Total Video2Dvd is ok!