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You cannot fix this error yourself but please don't worry. There is a huge problem occurring right across the board at this very moment with the PSNNetwork. Some consoles are not synchronising properly due to an internal clock error which is causing problems exactly like you describe. It is expected that Sony will soon have this resolved.
For a full breakdown please look at this FixYa Tip.
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If he bought it from best buy, ask for a two year reeplacment plan. after that, you tell them what happend to your psp. by the way, the replacment plan is only $29.99. They will either try to fix it, or they will give you a new psp, the same exact type as you said psp slim, for free. But heres a catch. after you use the replacment plan once, you may not be able to use it again. good luck. P.S. what happend to your nephew, is what happend to me.
The Game your playing is probably a Blue colored media. That is ones that spin so fast. You console has become dusty and loaded with lint probably. You can open the case and clean up the insides. Also while your in there, remove the ocver and polish up the lasers lens. This will probably get you back in business. If you do nto have success, contact me at Repairtech@ playstationclinic.com I run The Playstation Clinic at www.playstationclinic.com If you have a Slim Model it will cost more than the big model to repair. The slim model is $41 full refurbish including return shipping inside the USA. The big Fat PS2 Versions are $36 including return shipping.