Looks like this has been fixed, damn Elgato support is fast! Thanks to Adam at Elgato for posting a comment allreting me to this bug being squashed.

If you are a user of Elgato’s EyeTV software and like to export your video to your PSP, you might want to hold off on updating to the latest release. Matt just sent in an email alerting me that updating to version 2.1 will result in video not playable on your PSP.

This is a known issue according to support, and hopefully a fix will be out shortly. Until then you might want to stay at 2.0.1 as this version still works.

Thanks for the email Matt.