It already comes with an ISO loader. Also, a PS1 "emulator" is built into the firmware directly from Sony and it was always meant to be this way.
To play PS1 games you'll need to rip the disc to an ISO and use a program such as PSX2PSP and it will then convert that ISO into an EBOOT. Take this EBOOT.PBP and put it inside a folder. You can name this folder whatever you want/whatever will let you know what game is inside it. Then take this folder and put it into the PSP/GAME folder on your mem stick. From there you should be able to just play it. Some games need what is called POPSloader but most will run just fine. If you have issues with it and we can help you with that too.