Ok, did some research and found this one out on my own, so for anyone who is interested read on.
You can download an app from rockstar called Rockstar Custom Tracks.
This will rip music from a CD and convert it into a format recognised by the game and then copy them to the appropriate folder in your PSP. It will only rip music from original CD's in the drive, although if like me you wanted to copy a playlist across from iTunes then from within iTunes just burn the playlist to a CD and it will work fine with RCT. Obviously you need to own all the original CD's in order to do this legally.
This way is much easier than swapping CD's all the time - unless you just want to copy across an album or two rather than individual tracks.
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