So an update was run on the PSP from the UMD? Thats not good. The update must have flashed an official firmware over your custom firmware...meaning you now have a boring stock PSP.
On the main PSP menu (the "XMB") go to system (all the way to the left) then system settings, then system information. Then look at what it says for System Software. If its just numbers, you have a stock PSP again. If it says M33 or OE or if there are any other letters there, its still hacked but your settings just got messed up somehow.
Another easy way to check. turn off the psp. hold the power switch up until it shuts off. Then Hold the R trigger and switch on the psp. If you see a recovery menu, its hacked. if it simply boots up, its stock.
you said "ISOs from the game folder"
ISOs go in the ISO folder at the root of the memory stick. example, patapon would go here--> "X:\ISO\Patapon.iso". Eboots go in "X:\PSP\Game"