I keep trying to find the truth of the matter regarding the "enhanced" video capabilities of the 2.0 PSP firmware, and I'm not sure the fullness of it actually grokked by English speakers at this time.
IGN has a pretty good article up on the somewhat nebulous state of things currently, detailing how Sony is delivering 320x240 video which is somehow widescreen - it's got a couple samples from P-TV as well, the Japanese service Sony is launching for downloadable shows. They might want to consider subtitling some of those prorgrams for an English audience, actually - I think they'd be surprised how successful it could be over here.
The long and the short of it is that it's not exactly the native resolution/holy grail we were hoping for, but it would be cynical to say that progress hadn't occurred at all. It may be that homebrew is still the only viable route to full res video, which makes me mad, but I doubt that even registers on their equipment.
I saw a thread over at PSPVideo9 where somebody had grabbed the new Image Converter 2 Plus from Japan which encodes to the new format, and they seem to imply it can do better than we thought? Maybe? Who knows.