Instructions
Select the picture you want for a thumbnail and open it with your desktop photo editing program. Click "Re-size" and set the dimensions to 160 pixels by 120 pixels.
Click "Save As" and complete the file name with the ".THM" extension. Make sure the thumbnail has the same name as the movie file. For example, if the name of your movie is MyMovie.mp4, the name of the thumbnail should be MyMovie.thm.
Scroll to the "Settings" tab on your PSP, and press the "x" button while highlighting the "USB Connection" icon.
Double-click "My Computer" on your desktop, and then "PSP". In the PSP menu double-click the "MP_ROOT" folder, and then the "100MNV01" folder.
Drag and drop the thumbnail photo you created into the "100MNV01" folder, along with the corresponding movie file.