Okay, since so many people seem to be having trouble with updating without the network update feature (Which can only be used if you have a wireless router, and the US release.) I've designed a simple tutorial. There may be a faster way to do this for some, but I'm making the tutorial so that everyone can do it, and as simple as possible for that factor. Just as a note, if you plan on using homebrew DO NOT upgrade to 2.0.
Alright.
First, go on the internet to:
The US 2.0 Update
And download the firmware update. (Approximately 16 MB)
(Copy your "SAVES" to your computer if you haven't already done so.)
Second, format your memory stick by accessing "Settings", then "System Settings", then "Format Memory Stick".
Third, make sure your Computer and PSP are on, and that you are at the Home menu of your PSP (Make sure by pressing "Home"). Now connect your USB cable to the PSP and an open USB port.
After you've done this, move over to the "Settings" Menu on your PSP and find "USB Connection" , pressing the "X" button to enter it. After the PSP has finished recognizing and installing hardware if necessary, access the "My Computer" menu, most likely by double clicking it on your desktop.
Find the Drive that your PSP has been made into (Probably the last drive on the list, labelled "Removable Disk" ) and double click on that drive. Enter the "PSP" folder by double clicking it and then enter the "GAME" folder.
Create a folder inside the "GAME" folder titled "UPDATE" (In capital letters.), you can do theis by right clicking, selecting "New" then "Folder", and then typing in "UPDATE".
Now minimize the window (By clicking the "_" button in the top right corner) and find the .PBP File you downloaded (The Firmware Update). Right click that, and click "Copy".
Click on the Minimized "UPDATE" folder on the taskbar and right click inside the window, selecting "Paste".
Unplug the USB cord from the PSP and exit the USB Mode screen, by pressing "O". Now, plug the Power cord into the PSP.
Cycle over to the "Game" menu and down to "Memory Stick". Press "X" Twice and follow the instructions. Do NOT unplug the power cord, remove the memory stick or turn of the PSP until the Upddate is complete and you are prompted to restart the PSP.
When the PSP restarts, format your Memory stick again. To avoid any problems with the switch to 2.0, reset the PSP to it's default settings to avoid conflicts between the firmware versions by going to 'Settings' then 'System Settings' and then 'Restore Default Settings'. After you've reset the settings you can set them to your old settings again, and go 2.0!
Hope this helps, and feedback would be much appreciated!
(Updated to help fix any conflicts between firmware versions)
Or a side note, if you've upgraded to 2.0, and want to go back to 1.5 for any reason, see
this thread. 
Linear Mode
