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yeah, something sounds odd with it. I'd try a different charger. Solid lightning bolt, solid red light when charging. Light goes out as soon as not charging. You should be able to use the reader just as if it was on battery power. No, you should not lose any data.
Are you connecting something via USB? I've seen some PSP chargers have a USB mini-b attachment. You just need to plug in the barrel connector.
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