There is also the matter of reformatting every single PS1 game in order to function on a squished widescreen.
The problem with this sort of thing is that a lot of the hotly desired PS1 games were multi-disc. Even if you take into account redundant data across discs, you are still looking at downloads in excess of 500 Megabytes at the least, an absolute nightmare for dialup, which probably won't be supported anyway. In addition to the aforementioned screen formatting required and the possible control formatting CapAmerica mentioned, you are looking at a lot of effort just to put something on a download service. So possibly not every single PS1 title ever will get the download treatment (i.e. Jumping Flash and Bubsy 3D). So then the effort is relegated to games worth the effort to do so.
But then here is another flaw in logic. If you are going to all that effort, why not just sell it standalone? I know the Ian's of the world hate it, but ports are actually a good idea from time to time. Many of the GBA's best sellers were SNES ports with a few added bonuses. Even one of the DS's highest sellers is an N64 port, althought it is not THE highest (go Nintendogs). And while the PSP gets derided for ports, it is not necessarily the fact that it has a lot of ports. It's that it doesn't have the RIGHT ports. Like the upcoming Def Jam Vendetta: Fight for New York: The Takeover. I'm not sure anybody wanted that on the CONSOLES, much less a handheld. But having FF7-FF9 and Metal Gear Solid 1 ports at launch would have definitely helped out the PSP's library troubles at launch. And they would have reached a higher audience of PSP owners than PSP owners who happen to have broadband, who happen to remember some old PS1 games, and who happen to have the desire to download old PS1 games on a download service.
By contrast, the Wii download service is much different, as the maximum dowload there probably will not exceed 64 MB at the absolute most (unless that TG-CD Castlevania game somehow gets on there.) For games like Super Metroid and Pilotwings, it would be more costly to develop, test, manufacture, package, and attempt to market ports of these games on the GBA or DS. Considering they barely exceed 5 MB total, it would be much wiser to offer them and the rest of the respective legacy system's library as a boon to a new console, and in the Wii's case offering the most robust and extensive backwards compatibility lineup in the history of the industry. They throw them up on the service with no effort and Nintendo gets revenue for, basically, electrical signals. Nintendo is smart here, maximizing the profitibality of classic games while refraining from a high amount of effort to make them available.
But I do find it humorous that the titles the PSP audience wants most are not games made for the PSP.