You can't play straight psx isos on the psp. Convert it to an eboot with popstation, and you'll get an eboot, and keys.bin. You put those in the GAME folder, and it should play. The ISO folder is for psp games.
First thing you need to do is convert the PSX .iso to a EBOOT.PBP file. I highly recommend Zinga Burga's POPStation Converter for the job. It creates a EBOOT.PBP that doesn't need the KEYS.BIN file! Create a folder in your GAME folder with the name of the PSX game, then copy the EBOOT you just created into said folder. Also you can't play PSX games if you have a modified top menu. There are ways around this but by default it wont work.
i tried to start the game after i converted, and the player started, but it never loaded the actual game. just a black screen. also, when i converted, it asked for a game ID.
so i just typed in 12345. lol. is that also a problem?
Easiest way would be to just reinstall 3.40 OE-A as I assume when you customized your PSP you didn't make a backup of your files. The game just exits to a black screen because it crashes. First thing to do is to get back to the original menu, so reinstall 3.40 OE-A.