Point 1: Get a DS.

Point 2: They work pretty well, but you must take into consideration that you only have 1 "analog stick" and 1 set of shoulder buttons. I don't think most RPGs like FF need 2 analog sticks and L2/R2 buttons, so it should be fine in that regard. However, you need a hacked PSP to play your own PSX games. It's a pretty complex process if you're not comfortable with doing that kind of stuff, and it could potentially 'brick' (render useless) your PSP. If you're getting a brand new PSP, it's even harder to do it.

There will be downloadable PSX games for non hax'd PSPs, but currently I think you need a PS3 for it and you have to pay for 'em. I could be wrong about the PS3 part.