In my opinion Sony just didn't really know what the handheld market wanted, so they took the ideology of what made the PS2 a success (Up the graphics, make 'big' epic games etc) and applied it to the PSP. But it didn't really work and people didn't really care for that experience on a handheld. I think Sony have learnt their lesson in that regard for the next PSP though.
The other thing is I don't think Sony really have the balls to put enough behind the actual handheld games which arn't a God of War or something. When Nintendo launch Brain Training that thing was everywhere, TV ads, priority store shelving etc, they treated it like an A list game and people responded. I'm not sure I can see Sony ever giving that sort of promotion to a game like that, and we've seen Papaton,Invizimals, LittleBigPlanet PSP etc sort of just been forgotton as if Sony doesn't beleive a game like that can sell big numbers :/.
It looks a long way back for the PSP2 from here as the PSP sort of dug a hole for itself, but it's surely better placed then the PSP was at launch - with no past PlayStation handheld. It's very hard to think what Sony will do with the PSP2 to address this problem though and not just end up recycling more Socom spinoffs :/. I still think a Pokemon ripoff could be huge for the system lol.
