I ended up buying a PSP a couple of months ago and came to the realization that there aren't a whole lot of good, usable backgrounds available. Sure, there are 480x272 wallpapers out there, but oftentimes they either suck or clash with the white menu text (the color of which cannot be changed...naturally).
Naturally, I started up Photoshop and got to work.
So far, I have two of them done; more will probably come as I get bored (I'll update this thread and shit).
I'm going to keep an archive of them here:
http://www.spectere.net/psp/wallpaper/ but here's the two that I have finished as I type this (both are characters in the Sonic universe...woo):
Shadow:
Knuckles:
They look a mite muted but that's intentional. The XMB is quite usable with both pictures, which is the main design goal.
For the record, the amount of work that I do on an average piece is generally cropping out the character, photoshopping a background behind him/her, and testing it on the system to be sure that everything is still readable. Not hard and I fail to see why so many people are apparently incapable of doing it.