You could just use swap magic with a slide card, and you won't need to mod your psp at all. It's just a boot disk.

There is also a program for a PC called "Frets On Fire" which is pretty similar to Guitar Hero. You can add your own .ogg files and edit them to make them as hard as you want.

This is made to be played by holding your keyboard as a guitar, but you can also get a USB adapter for your Guitar Hero Guitar and use that instead. You should check it out.

I just ordered GHII off of ebay. I hope my arrives in better condition than yours. I should have just bought a new one. We'll see when it gets here.