Mp3 quality is really good when paired with a good headphone but still cant be as good as Ipod. You want quality as good as Ipod, go get an Ipod -___-
PSP is meant for multi purpose only, Gaming, Surfing net, mp3, video, emulators, play ps1 game, homebrew, pictures, whatever you want. Its the Walkman of the 21st century =P

@taeru
First, you must understand the concept of Bricking.
Bricking happens when you mess with the system files in the flash0 folder of the psp. When the files there aren't placed properly or replaced with different(and often) unusable or wrong version files, the PSP will brick. This is because when you start up the PSP, the machine is unable to read the files properly thus, not being able to start it up at all, that is what we call a BRICKed psp.
(of course, it goes more in depth, but im keeping it simple for ya) ^^

Now having understood that, it is clear to you that as long as you only mess with the files that are in your memory stick, it is likely you will not brick your psp.

That is the first precaution. Second is, make sure the homebrew program that are installed does NOT modify the flash0 files when you play them. You will need to take extra precaution when using these homebrews. Make sure for every homebrew you download, READ THE README!! That is the best advice I can give you.

I shall list down homebrews that MAY brick your psp(when handled wrongly):
Custom XMB
Custom Firmware Upgrades/downgrades

Don't think theres anymore than that. Those two are the most important.
Now you should be clear that msn for psp does not brick it no matter how you use it and yes those apps will require a wifi connection.
PSPradio enables you to listen to INTERNET RADIO not FM radio =P

Modifying bootscreen, game processing screen and xmb is ALL PART OF FLASH0 so very careful with that.
The reason slim bricks easier than older versions is because there are FEW custom xmb files for the latest firmware(3.71 M33-x) Thus when replacing wrong version files, as stated above, BRICK your psp will.

Hope that answered most of your questions. LEDs can be found any hardware shops, as long as you know some soldering and wiring electronics you will be able to hard mod your psp as well(not like me, geek, don't know soldering shyt)