No, it's not hidden folders. It's how drive manufactures rip you off. Seriously. Lets work though the math:
The manufactures say they are giving you 1 gb, right? Look on the box, and somewhere it will (or, it should by US law) say that 1 gb = 1,000,000,000 bytes. This is all fine and dandy, except when a computer (i.e., psp) calculates the drive size. Computers work in base 2 (0 and 1), not base 10 (0, 1, 2, 3,...., 8, 9). For them, 1 gig is equal to 1,073,741,824 bytes (2^30 bytes). So, if we convert the manufacture's 1,000,000,000 bytes to megs, we get 953 megabytes (roughly, this can vary a little due to some estimation on the manufacture's part), and that is your problem. And no, there is no way around it, and the manufactures aren't going to change anytime soon. So the problem is not with your memory stick, your psp, or you. It's with the damn manufactures.
Oh, and if you don't trust my math,
just google it.
As for the topic starter, your problem has something to do with what is called allocation. This is where the computer "sections" it's hardrive into indiviual sectors because it can't possibly address every single possible byte. Useing the example above, in order for your psp to find every single byte on the memorystick, it would need to proccess an address that is 30 bits long (0x000000000000000000000000000000, would be the address for the first byte on a one gig stick). Remember, a byte is only 8 bits long (00000000). So to find one byte, it would take 4 bytes in a file table. As you can see, this is very unpractical from the computer's point of veiw. So it "allocates" or sections the drive into smaller pieces, the default for a one gig stick is 4 kilobytes. When a file is saved, it is put into a block of sections, and is rounded up to the nearest 4 kb.
An example of this in action: create a blank txt file in your memory stick. Then click on it's file properties. You'll see that it's real size is 0 bytes, but it's size-on-disk is 4 kilobytes (or whatever the alocation size is). So whenever you save a file, it can waste up to 4 kb because of alocation. The only way around this is to not have so many files, which is impossible with dev hook because the dumped firmware needs all of those files to run.