To crompton...
Sony actually uses a proprietary MP4 video format. I'm not sure about the AVC thing the Admin said, most likely true but i do know that the MP4 videos for PSP merely have a different header as compared to other MP4 / MOV videos.

I use the Nero 7 suite to encode videos for my PSP, and it seems very good and powerful (it actually has a "PSP Video encode" setting). For a cartoon such as family guy, you can easily re-encode them at a lower bitrate (as compared to non-animated) to preserve space, and still achieve a pleasent quality, but i guess it really is user preferance.

Remember, when encoding your own videos...
1) Use low complexity audio
2) Use a bitrate calculator to achieve your desired size
3) Use lower bitrates for cartoons for more efficiency

I actually encoded Family Guy at a video bitrate of 200kbps and it's good enough for me, especially at 30MB.

Hope i helped. Peace.