I'm using firmware 5.03. I made sure to do my research before buying this lol. I read that 5.03 is the most compatible with homebrew and games, but I don't know if thats the case anymore. I bought it with firmware 4.21 on it. Then I upgraded the firmware and used chickhen r2 and then installed cfw 5.03 Gen-C. Its annoying though that once the battery runs out of life or when its removed you lose the firmware and have to exploit it again. I didn't realize that before I bought it. Though I suppose its not too bad since it prevents the psp from being damaged permanently.
Overall though it works great. The main reason i went with the psp3000 was because i wanted be able to use the composite/svideo cable while playing games without the use of any extra homebrew software. I plan on streaming some psp gameplay once my s-video cable comes in. The screen is really nice on this version as well.
The only issue I have is that the analog stick doesn't seem to work properly. It seems to just go off on its own in one direction sometimes while im playing. I prefer using the D-pad anyway, but the analog stick is necessary for some things. So most-likely I will have to replace it. I'm trying to find where I can order one from though. Its a silver psp, the one from the ratchet and clank bundle. So it doesn't have the black analog nub. However I think, but i'm not positive, that you can simply remove the top part of the nub that you interact with and interchange it with a different control piece. In any case, I'm gonna probably take it apart first and see if its anything obvious that I can just fix myself.