this bug is well known and it's known as independence exploit.
it works on "fat" ps2 (every one except slim models). it causes a buffer overflow when starting a ps1 game. if you put specifically crafted files on the memcard beforehand.
you can boot unencrypted executables off memory card this way [the "unencrypted" part is important here]. the name 'independence' came from possibility to use homebrew apps on ps2 without messing with console's hardware - you don't void your warranty this way, and don't risk bricking your ps2 with some modchip.
now what i was actually talking about in my previous post is a feature [not a bug] present in every ps2 console, put in there deliberately by sony.
on system startup console searches memcards for directory BxDATA-SYSTEM , BxDATA-EXEC and BxDATA-DVDPLAYER [ x stands for region code of the console, e.g. E/A/I , specific to Europe/USA/Asia, there are some others most likely ] and if it finds certain files inside it tries to verify their digital signature [which is said to be unique to each region and each memcard]. if the check passes, files replace certain modules of the ps2 bios or can be executed right on startup.
that's how bb navigator and sony ps2 dvd update disks [the one provided with some ps2 infrared dvd playback controllers] worked - you didn't need to boot console of _any_ disk. only with a memcard you used during installation of the tool. also that's how hdd utility provided with ff11 for ps2 works - they install bios updates on memory cards and sign them in a special way. you can browse your ps2's hdd from the ps2 browser afterwards, and save games there instead of memory cards.
some people have figured out that digital signature and created their custom executable that patches ps2 bios in a couple of ways. that's how memento was created - it's essentially a software modchip on a custom 32mb memory card for ps2 (memor32), which requires no hardware intervention. pure plug-and-play, exploiting features put into ps2 by sony.
this way you could create updated ps1drv and make ps2 update its internal ps1drv to your version, to have extra features - if you can code and digitally sign one, that is.
but that thing is highly illegal, as it involves sony's proprietary digital signing, encryption, verification and drm-like solution, which name is written right above memory card slots on your ps2
[i won't post its name here, since it attacts unwanted attention]