This is a direct quote from
PSP-Hacks I take no credit for this tutorial, as I am only sharing it.
Since this has been helping others in other random threads I figured I'd post it up as it's own little tut
make your BG in photoshop or gimp @ 480x272
choose file > save as
in the save as type box choose PNG
in the filename box type 01-12.bmp
save it out
enter recovery mode on your PSP (hold the R trigger when you start up)
choose advanced
choose toggle flash0
go to my computer > your psp mem card
go to vsh > resources
copy your existing 01-12.bmp to your pc
put your new 01-12.bmp on your psp in the resources folder, overwriting the original one
right click > arrange icons by > name
back on your psp toggle flash0 off
choose back
choose exit
your psp will reboot and your 01-12.bmp will be the new BG behind the waves.
If its all white, go to settings > theme settings
choose wallpaper > do not use
in theme choose the first white box under the word original, thats the working one all others wont work anymore.
Now you have a working 01-12.bmp with all the quality and about 1/3rd the filesize of a normal .BMP