How does ppsspp get the game icon and image

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Either the devs add support for it or you edit the image with UMDGen.
I fix the problem by editing the image

The game have some kind of lba protection(it look for the files at certain sectors of the image)so if the lba is wrong,the game won't run(black screen)

The moment you replace the image,the lba becomes totally wrong(the image have false lba which means,the image total size it's bigger than all of the files and by replacing the png,that wrong lba get automatically fixed which will lead to black screen)

So to fix that do the following:
1.Open the image with UMDGen
2.File=>File List=>Export
3.Extract the ICON0.PNG
4.Open it with your image viewer and save it as normal PNG image(not interlaced...usually the images are saved as not interlaced and there is an option to save as interlaced if you want(if there is no option,they will be saves as not interlaced)...also make sure that the size is not bigger than the original file(even by byte)

To be sure that the image will work(if you don't have a way to find if the image is saved as interlaced or not...I have Irfan View and XnView,both of them can tell you(Windows Picture and Fax Viewer don't save as interlaced,you just have to be sure that the size is not bigger than the original)you can create a dummy PSP game with UMDGen which contains one folder named PSP_GAME and inside place the image.
Save the iso and try with the NewUI to see if the image is visible.If it is,use that png for the steps below

5.Drag-drop the new image(png) and replace the old one(you will see below that the size of the image become smaller by ~40mb)
6.File=>File List=>Import=>Choose the file you exported=>Yes.
7.Save the image.

That's all.