I tried putting it in the ISO folder but it doesnt show in the XMB.
I also tried creating a MOVIE folder in GAME and putting it in but, it shows as "Corrupted Data" in the XMB.
You need to make a folder in the root of your memory stick called MP_ROOT and inside that you need to make a folder called 100MNV01. Next you need to get a video converter, I suggest getting 3GPconverter (It's what I use, great program)
Assuming you are using 3GP unrar the file and then run setup, select english, and when you get to the format you want to convert it to select MP4 direct, renamed.
After that select the folder you want 3GPconverter to put the video in once it is done converting (in this case it would be MPROOT/100MNV01 in the PSP). Then drag the movie file in, 3GP will convert it and put it into the specified folder, then go to the Movie section in the XMB and it will be there.
That's odd. I've never downloaded a movie before. Have you tried putting that file (whatever format :S) into the Video folder in your memory stick root? If you don't have one, then make a folder named VIDEO. M'sure ya do.