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There's an explanation in their forums, explaining why the PSX is easier to emulate than the SNES or GBA, reading it may help.
I know there is a way to "rip" the CD's down by getting rid of movies/sound/music ect... I actually managed to get a game file reduced by nearly 200MB by taking the sound and movies out, making it fit easily on my 512 CF card. It isn't simple though, it has a lot of steps and variables, though it sounds like he may release an in-depth explanation on how to do so.
Given I still couldn't run the emulator they have there now, though it was for the Ipaq series, but supposedly the next version (FPSE-CE) has massive improvements for all Xscale platforms.
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