Now that the "Movie Madness" custom firmware known as 3.03 OE-B is out, everyone can have a taste of full resolution support for MP4-AVC formats. Over at DCEmu, some folks have made a new settings file for the tried-and-tested 3GP converter.

As Belmont Slayer writes,

I went ahead and created a new settings file for 3GP Converter to allow 480x272 AVC conversions. This allows those who aren't tech-inclined to convert their videos for use with Dark_AleX's 3.03 OE-B firmware. Simply unzip the folder, run the program, choose your quality and convert.

Depending on your file size, it will take a while to convert them. Luckily, this runs on the PC, so feel free to play with your PSP while waiing for your video to be fixed. Also note that the readme's not in English, so be very careful how you use this.