Found the problem with RE2 on psp. Thanks to RJC4LIFE & x3sphere.
I just tried this and it works great. Change the Game ID & Save ID to SLPS 01510If you open up the EBOOT in PSX2PSP you can change the Save ID without re-ripping.
RJ said the Japanese Game ID works, which is SLPS 01510. Try that.
Game just loaded fine and I entered the cop station with no touble running 3.71M33-3.