I'm no expert on video or video formats myself but I'm pretty sure it's possible that someone with the knowledge could program a video player homebrew allowing the PSP to play mp4's with a larger resolution than 320 wide.
Since the PSP video player can currently only play mp4's with a max width of 320 off the memory stick this would be quite an advantage.
It was just an idea I had last night that I thought I'd share in case someone with the knowledge out there reads this.