http://www.krizka.net/2007/08/27/error-80020321-when-lauching-an-psp-iso-game/"Many PSP users that have a homebrew enabled firmware, like the M33 edition, like to dump the contents of their games from the UMD to the memory card. This will save the file as an ISO, allowing them to backup the games or play them without having to carry any UMD disks around. I do the same thing, but suddenly it stopped working today. I tried to launch “Mind Quiz” to take daily test, but I was greeted with the following error: “The game could not be started. (80020321)”.
After a lot of tinkering, I found my problem. To play any ISO games, you need to have an UMD game disk in your PSP. It does not matter what game it is of. In my case, I was running a little experiment with a UMD video disk that came in my PSP starter pack. After I finished, I forgot to take it out of the PSP. Well, at least I learned that it has to be an UMD game disk, and not a UMD video disk.
If the above solution does not work for you, you might also try to upgrading to the latest M33 firmware. I found that with Dungeon Maker: Hunting Grounds, I had to have version firmware version 3.40 or greater. If this is the case, you might want to check out my M33 upgrading tutorial.
Another way is to use the No-UMD mode that is configurable in the recovery menu, but it is not compatible with all games. To get into this menu, you have to fully shut off your PSP, and turn it on again while holding the R button. When you load the recovery menu, navigate into the Configuration section and select the “UMD Mode” option. Press the X button until you see “currently: M33 driver -NO UMD-”. Navigate back into the opening menu, and exit. This will restart your PSP, and you are ready to roll."
