That sounds like a lot of factors! Do you know of anyone that's still in the Zero scene that might be capable of doing something with this?
I think PSP emulation is not realistic.
Most devs have already pulled pretty great tricks out of their magical hats with PCSX4ALL and the N64 tech preview.
And that seems to be pushing the capabilities of the GCW0 at this time.
Of course there is still a firmware update in the pipeline that might offer new possibilities.
GPU wise not much will improve, as there is no KMS driver, which is needed to use newer versions of Etnaviv, which would improve the GPU, correct me if I'm wrong.
So yeah when the firmware gets released and KMS driver is made, if it will happen, than maybe there is some sort of possibility of PSP emulation, but don't get your hopes up, we're talking years here.