My phat PSP was working fine and reading both ISO and CSO files but now it doesn't?

May be...

The main thing here is that instead of formatting the memory card through the PSP, I formatted the memory card by the right click option when the PSP was connected to my PSP. After having formatted I created a folder called "ISO" and put my games into it, but even then the PSP won't read any of them. FYI: My Phat PSP is home brew ready and has worked perfectly fine before. Its just after my stupid mistake of formatting it manually from the PC that this problem has risen. Please suggest as to what I should do now to get it back and running??? Thanks in advance.

Try reformatting it again, but this time do it from your PSP. It should rebuild the structure.

reinstall the psp firmware or update it if u can

P.S remember to rehack it to play iso games