So if I buy a Pandora Battery, and use this app on a memory stick, then follow the instructions for inserting the battery and MMS on youtube, I should have a modded PSP with the latest firmware ready to go?
Not through Pandora + MMS. Your only possibility is if you're on firmware 5.03 or lower. And then it's only a cfw stored on RAM so if you turn the psp off (complete shutdown, not sleep mode) then you'll lose your cfw.
Use the search function for a ChickHen R2 guide. Or check the link in my sig.