You cannot (I repeat CANNOT downgrade your PSP with any firmware higher than 3.50 without a Pandora's Battery). The best way to downgrade a PSP Slim & Lite would be to use a Pandora's Battery/JigKick. It will universally downgrade any Sony Firmwares. Yes if you brick your PSP and send it to Sony, they wont be happy, but the consequences of bricking your PSP are now eliminated because of Pandora's Battery. When you brick, use this, and it will start your PSP back up without Sony's help. On the subject of ISO's, yes a Custom Firmware can play them, but downloading games you didn't buy is illegal and there are ALOT of scam sites that will take advantage of you and your money. So BE CAREFUL!!!
You don't downgrade PSP Slim & Lite to install Custom Firmware, it's completely different then the Original (Fat) PSP (and quite complicated).
Custom Firmware means mostly Emulators, Downloading ISO/CSO games, and Homebrew. Use Homebrew, because Sony has refused to give us PSP owners the things we want. We must rely on Homebrew to give us these things... I want to watch YouTube videos directly on my PSP... I bet 90% of the PSP owners out there want to do this, why, in the last 3 years hasn't Sony released a Firmware that supports this? Thanks to PSPTube, we can.