well, updateing, is really quite a mixed bag you see, on the one hand, you have to update in order to play most of thenew psp game that sony releases, and on the other hand, if you want to run homebrew, updating becomes a problem, because the higher you go, the harder it is to use homebrew. so the question you really have to ask yourself, is "what do i want my psp to do for me??" of you want it to play homebrew, then you dont want to update, and if you want it to play legitimate games, then you do want to update.
However, the homebrew comunity has come up with serveral methods to cheat upgrading, in a sence, take the new 3.02 OEB custom firmware that was just released, it offers all the features and game compatablity that an official update would, and still lets you use 99.9% of all homebrew games and apps that are available. whatever you decide to do, is totally your choice, but my recomendation, is that you dont update, simply because you never know what may become available on the firmware you have.
if you are interested in homebrew though (like i am) you should check out these popular psp homebrew sites, in order to get a better understanding of what both sides offer you.
http://www.psp-hacks.com/
http://pspupdates.qj.net/
anyway, good luck with your psp, if you have anymore questions, i'll do my best to answer them for you. good luck freind
Peace
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