PSP should not be even able to detect things in the "ISO" folder if it's running OFW.
It would have to be something in the "GAME" Folders for it to even appear.
Go into your system settings and confirm the Firmware version please.
If it's a CFW it will usually have some sort of denomination like "Such and such Firmware" "X.XX, or Version-x"
If it's OFW it will just say "Firmware X.XX"