It is possible that the PSP related software got a DRM re-encode to use new policies/framework/format (e.g. UltraViolet update). So everyone needs to redownload their PSP library.
I tried downloading a PSP demo after discovering this and it refused to install, but it offered to copy to a PSP instead (with a similar message about the Vita scrolling at the bottom), so it looks like that's how it's supposed to work. If there's a new framework in place, not all PSP titles on the store have been updated yet. I'd like to think that it works this way so that only PSP titles that the publisher will allow to be played on the PS3 will install, but PS1 games and mins won't copy either if they're installed. I can try redownloading one of those, I guess...
edit: yeah, if you download a mini now and install it, the bubble stays so you can copy it over. Who thought that was a good design for people with more than one or two games?
It is ok to ask for authentication again since on PS3, everyone can see all the downloaded content once logged in automatically. Someone else may visit your den and try to copy all your apps to his or her PSP/Vita. But it should be session based. i.e. don't ask for password for every single transfer. Ask once every 30 minutes for example.
The thing with Ultraviolet is you can move stuff around without any trouble, it's up to the device to check if your account has the rights to run the content (in theory anyway, that part of Ultraviolet isn't supposed to launch until next year). That's how it worked before 4.0 anyway; sure, you can see all the content, but when you try to move it to the system it complained about being the wrong owner. iirc, you had to sign into the proper account to do a transfer, and it automatically activated the PSP to the correct account.
My problem is this is adding a lot of trouble to moving your content around, since there's a limit of 32 games you can have sitting as install bubbles, they can't be put into folders, and they sit at the top of your games list.