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Formatting flash1 can be done by pressing sqare, triangle, select and start while the PSP is booting. I still think there are Skype files on the memory stick, when I start Skype the MS led blinks and if I try to start Skype without MemoryStick it just shows "There is no MemoryStick pluged in" or something like that. Try formatting the MemoryStick and then load Skype again. As there is no CFW or something on the PSP, you could also contact $ony.