You can still run your games, AND install homebrew stuff.
This was the original goal when I bought my PSP. I got distracted by actually playing games.
I finally got around to doing it.
I have the GOW edition PSP slim, it had Sony firmware V3.94 installed.
I sort of followed the instructions that I found here
Things you need:
Pandora Battery - modified battery to allow access to the PSP bootstrap mode,
I borrowed one
Sony memory stick - 1Gb stick works fine
PSP Grader v0.008 - installs firmware, I got it here
modified PSP firmware - overwrites the Sony firmware, I got it here
Connect the PSP to your PC; start USB mode.
Copy the Sony memory stick to PC
Format the Sony memory stick
Start PSP Grader
Locate the eboot.pbp in the PSP_500_FW.zip
Download file to stick
Disconnect and power off the PSP
Insert memory stick (if you haven't)
Hold down the L button
Insert the Pandora Battery (often PSP auto-starts) and start PSP
Back up NAND
Install 5.00 M33 (or similar)
I have spent all my time playing a Magic the Gathering Homebrew (Wagic) in stead of programming anything.