do they actually fix the defect that causes the dead pixels? or just the individual pixels? if they just fix a few pixels and then they are likely to die again, I would still be pretty pissed about paying for shipping.
Reportedly, Sony replaces the screen. As far as I know, the defect that causes the dead pixels is in the manufacturing process, and they're there from the moment it rolls off the line; it's not a problem that develops over time.
"But wait, don't they test them?"
Of course they do. But if the manufacturer insisted on only selling panels with zero dead pixels, they'd be throwing away a quite large portion of their product, and frankly, for the price most of their customers are willing to live with a handful of dead pixels as long as they're not too conspicuous (which varies with the locations of the pixels and the application). Also, testing is expensive. This may be hard to believe, but for many products test/QA is overwhelmingly the most expensive part of the manufacturing process, and it should be expected that it will be optimized, like every stage of manufacturing (and business in general), to favor eliminating the most expensive failures and not necessarily the most common ones.
In this case, I suspect that it was not the LCD manufacturer that screwed up. Barring a really big hiccup in the manufacturing process or outright lying on the part of the LCD manufacturer (both of which are possible but strike me as relatively unlikely under the circumstances), Sony knew or should have known roughly what failure rate they were going to get, and they already had a PR line in place to deal with dead pixels. The PSP manual reportedly even contains a disclaimer worded in a way that suggests that
every LCD screen suffers from dead pixels:
Red, blue, or green spots (bright spots) or black spots (dark spots) may appear in certain locations on the LCD screen. The appearance of such spots is a normal occurrence associated with LCD screens and not a sign of malfunction. LCD screens are made using highly precise technology. However, a very small number of dark pixels or continuously lit pixels exist on each screen.
(grabbed from GameSpot, who hopefully don't have any incentive to make up quotes and attribute them to the PSP manual)