The official 3.03 is bad to upgrade to. You will have no homebrew.

Downgrade to 1.50, and update to 3.03 OE-A, then A', then B. That way, you will have the features of 3.03 (PS1 emulation, music visualisers, PS3 connectivity and the rest), along with the benefits of full homebrew, the ability to convert and compress ordinary PS1 ISOs for use on the hacked PS1 emulator, full homebrew, region-free UMDs, and a host of other features, such as recovery mode (brick protection) which is so important if you flash things to your PSP.

And no, you can run them straight from the Game menu.

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