transfer a copy of the movie....isn't a BR movie in the 10+gb...the biggest mem card i seen is a 16gb (and that wasn't a Sony Mem stick though), most are 8gb and i wonder how it looks...instead of a upscale...its a downscale...but i think it still would look good.
I think your second question answers the first. If you transcode the video to a lower resolution it will take less space to store it.
Well, it doesn't have to be 1080p to play on a psp. But I really doubt(even if I owned a psp) I'd be interested in using an entire memory card(it'll probably only end up being a couple gigs, but even then) for one movie, when I can already put movies on my zen vision m(and they sure as heck don't need to come from a blu-ray for a screen this small)
You can already do this over the internet... I know I've toyed with streaming videos from the PS3 to my PSP.
It's interesting stuff, but I prolly won't use it. I usually use the AVC codec at the highest settings and I'm happy with the results on my PSP. If I wanted to watch HD, I would watch it on my huge LCD (well not that huge). UMD quality is good enough for me.