Pragma - you're not hallucinating.
If you want a 1 GB stick, avoid the brick-and-mortar stores as they're charging $129+ USD for them. I just checked Amazon.com and they want a mere $75 for a 1 gig stick (plus S&H). Froogle is helpful as well.
If you want to put movies on it, they've gotta be converted to .MP4 movie files. If you have XP, use PSP Video9 to convert most media over to .MP4.
Sadistik - I think they're cheaper in Japan right now since the PSP has been out closer to a year now, while here in the Americas it's been out for only ~7 months. (Perhaps a price drop before X-Mas?).
Oh, and one last thing, if you pick up an import PSP, the primary select button is the O button, not the X button. I never could figure out why that is with PSX/2/P products...