My account was having some probs so I could not post earlier, so here's some quick info.
1) You don't need another phat PSP, however, you do need a PAndora Battery if you are going to install custom firmware. If you have a PSP 1000 with CFW, then you can turn any batt into a Pandora Batt. (You can try Phiine.com, they ship to india)
2) You do need a spare 256 MB+ MS Pro DUO, Sony/Sandisk are guaranteed to work, others could brick your PSP.
3) A Win XP machine (Sorry, no Vista) as the Pandora easy installer does not work reliably on Vista.
You use Pandora easy installer to turn your memory stick into a magic memory stick with the necessary firmware updates. Plz note that installing Kernel 1.5 is not recommended for Slim.
Use PSP Video 9 for video conversion, it works well.
I own a Slim PSP. I have not converted to CFW as I do not feel the need to yet, but I have the makings

In any case you can get PSP games between 500 to 1200, which IMHO is pretty reasonable. (Also there are all of 3 games I (want to) play on the PSP

)
Buy the biggest memory card you can afford (You can get a Sony 8GB stick for about 6k) as I very quickly ran out of space on my 4GB card.