OK, so I have been spinning gears on this for last few days.
Getting fed up of not being able to shift the CPU usage, even with framskip.

After hours of tweaks for PSP hardware. I finally realised, after adding auto frameskip.
I looked at E-UAE homepage and found out, there was no auto frameskip, hence me adding it.
However, it turned out frameskip is just broke. For last week I have been optimising and tweaking, using different FS settings, without realising, every test was with FS stuck on 1.

Currently up to 45 FPS running bubble bobble, it feels quite smooth. I have added buffer to sound to improve it for testing.
Currently, CPU load is around 120% at around 45 FPS. Which is pretty good considering, When I started it was 200%+ at 17 FPS.

I will see about upping an alpha build for people to test.