I was really excited to see that version 3 of Fab would enable us to backup movies onto our PSP’s. Its taken me about two hours to do this successfully. If you are interested the process is as follows! When you format a memorystick it make various folders. The first and most important from our point of view is MP_ROOT/100MNV01 these two folders should hold the MP4 files needed for viewing the film. However version three makes copies of those folders undernealth the previous folders so what you get is MP_ROOT/100MNV01/MP_ROOT/100MNV01. This being the case the PSP can not see the files it needs to play the film.
The answer I have found so far is this: Format the stick, Delete MP_ROOT folder. Copy the movie onto the PSP. You will now find that a new MP_ROOT folder with all you need is about half way down the tree. Left click and drag the whole thing up to exactly under the root.
The PSP will now be able to see the files and play the movie. I sure Fengtao will come up with a more elegant method, but until then I hope this helps!