In 02.07.05 the PSX and PS2 discs are properly detected.
PSX discs will show in XMMB Game Column and you can launch the PS1 game from there. It uses ps1_emu.self. If you press [TRIANGLE] over a PSX game icon you can pick to load the disc using ps1_netemu.self (Net).
There are a lot of other things in this release, but I’ll post about that in the changelog for the 02.08.00.
I tested PSX burned to CD-R and it worked, so I can confirm that it works with some games.
I hope you find this useful along with loading PS3 games from DVD/BD discs.