There are several people out there that have had this error occur when trying to use the wireless connection. this error is not software based and has nothing to do with the wireless settings.

I do have a solution that can fix this error but it is not for the faint of heart and if your psp is still under warrenty you should contact sony and have them replace it for you.

If you are not under warrenty like I am then there is only one thing to do, take apart the PSP.

Once you take off the front cover you may see some corrosion on the bottom left side of the main board at first, carefully remove that, now flip the board over you will see the on board battery, mine was heavily corroded and I had to replace that as well. Now continue the dissassembly of the psp to the wireless card. When you remove the wireless card there will be and additional smaller card that is on a solder point connection on that piece you will see a metal box. remove the top of this and if you have skill or a friend with skill have him desolder this and remove all of the corrosion/rust there.

After reassembling everything you can go to the wireless setting and the light will come on again and you will once again be able to use the wireless networking again.

If there is anyone that wants to host them I took pictures of the locations of the corrosion/rust spots so you can have a better idea about what I am talking about.