I started noticing that most video Podcasters were issuing separate MPEG-4 movies for 5G iPods and PSPs. So, in the new release of our software we have a template which creates one movie which syncs/plays on both devices.
I gave it a thorough test before rolling it out. The first three MPEG-4 videos we issued through the
LOBECANDY podcast feed on iTunes 
were created with MoviesForMyPod/PSP - and they automagically download & sync.
I believe the PSP thumbnail files can also be added to a Podcast feed as a secondary enclosure, flagged with "image/jpeg" as the mime type. After all, the PSP has a built-in web browser...
Labels: mac, mpeg-4, podcast, universal