I had an idea to allow people to burn their own UMDs while still giving Sony a measure of control that they seem to require. Remember way back during the peak of Pokemon insanity, that Blockbuster had a photo station for Pokemon Snap (essentially a rail shooter in which you took pics of Pokemon, instead of killing them, unfortunately) that would take N64 memory cards and print out stickers of whatever you took?
Sony should apply this concept to their UMDs, and have a self contained automated station in Gamestops and other stores that accepts CD/DVD-Roms, Flash Memory, and USB HDD. The data is converted into acceptable formats (if possible), and is burned onto a UMD. For further customization, PSP owners could download a PC/Mac creation wizard to design their own UMD menus and UMD disc labels, the latter of which would be laser printed onto the UMD.
Payment would most likely involve registering for prepaid cards at the store, which includes your information (this is to give them the feeling they are cracking down on piracy, as futile as it is), which would be inserted into the station.
Unfortunately, I don't see Sony allowing someone to copy homebrews onto a UMD, assuming it were even possible to play on current or future firmware versions. So, at the very least, it provides people a way to burn their own content onto UMD to an extent.