It won't play M.U.G.E.N. - Linux on the PS3 is quite limited, and PPC CPU based Linux is not the same as Linux for a x86 based CPU, not at all.  MUGEN is for x86, PC based CPUs, not what the PS3 has.  It's been tried, so it's now.

However, you will probably chose not to believe me, and go ahead and try it anyway.  Just don't tell me (reply) that you tried it, and failed, because; my head will swell up again, while I laugh and replying back I told ya so.  My head is big enough as it is, so, keep it to yourself when you fail...

It doesn't work on PSP because it is not a x86 CPU either.  PSP and PS3 have nothing in common except the XMB, that's it.  People are always comparing the two,  because their interface is the same.  Sony must be laughing their asses off, because people are falling for it time and time again...

The options crash and there is no sound.

Cammy, Sakura and Mai do not work without conversion.

Gameplay can be slow.

The 4v4 battles crash if you have a different character than kfm.

There are other problems with converting characters, like moves are not right, and one hit takes half your health.  Some of them freeze completely or leave the screen when executing moves.

There are many more issues for the PSP port, IF you want to call it that.