Having just announced how to get UMD games over the to Vita, Sony has also explained how you'll copy over save games and actually enjoy your PSP titles on the Vita (looks like I'm buying a 32MB card then!) The first bit of good news is that to get save game data over, you copy it via a PC (via a little program you'll need to install called Content Assistant) or PS3 to the Vita, so you won't have to start the game again.
So, yes, you'll need to pay again for your UMD titles, buy that's a choice you make, you can always keep playing them on the PSP. Hopefully the discount will be a decent one. But it looks the PS Vita will happily keep the PSP legacy running.