People keep repeating this but it's not true.
These retro consoles only need the most popular and iconic games to be there (usually one per franchise).
Licensing issues aside, you can cover all the bases with the most popular PS1 games (of course there won't be any great PS1 game ever made on there but it's not the point of these retro consoles):
Third-Parties:
Ridge Racer Type 4, Final Fantasy VII, Resident Evil (2), Tomb Raider (1 or 2), Tekken (3), Metal Gear Solid, Crash Team Racing, Crash Bandicoot (1 or 2 or 3), Spyro, Castlevania Symphony of the Night.
Sony for International markets:
Wild Arms, Jumping Flash, Jet Moto (1 or 2), Cool Boarders (3 or 2), Syphon Filter, MediEvil, Wipeout, Twisted Metal (2), Gran Turismo (1 or 2), maybe Legend of Dargoon (if they want another RPG)
Sony for Japan:
Wild Arms, Jumping Flash, Everybody's Golf (1), Intelligent Qube, Arc the Lad, Parappa the Rapper, Devil Dice, Doko Demo Issyo, Gran Turismo, maybe Legend of Dargoon (if they want another RPG), Ape escape if it was possible (but alas no dualshock)