In the above video is a demo of latest version of Zodttd's PSX4iPhone. What's new here is that it is running not on iPhone 3G but, the iPhone 3GS. Zodttd just updated his blog saying that he has now got the emulator running on 3GS and with the higher framerate and faster processor, the gameplay is much more crisp and not laggy like the iPhone 3G.
You'd wonder how did he do that as 3GS is not yet Jailbroken. The answer is really simple, he can make some special builds in limited quantities that can be placed (alongwith the bios) into public directory using tools like DiskAid etc. It is THAT simple!
To get one of the limited builds, all you have to do is e-mail him your 40 character UUID at zodttd[at]zodttd[dot]com and follow the payment instructions he sends to make a $10 payment. It's not much money if you want to get that VIP tag.