I've just heard a lot of folks wonder aloud things like "Why is Square Enix supporting the PSP so much when they could make these games on DS," or "why are developers ignoring the Wii; there's so many systems out there."
My original post is in response to these questions along with the arguments I mentioned in the first paragraph. IMO, devs are seeing what I'm seeing, which is that a large install base doesn't necessarily mean the dev is going to generate big time sales and profit by releasing their game on this popular system. They might actually be better off releasing their game another system where they don't have to compete with many other games.
My Top 5:
Shadow of the Colossus, Metal Gear Solid 3, Shenmue, Skies of Arcadia, Chrono Trigger
My 2 nex-gen systems: PS3 
and Wii 
Prediction Aug '08: We see the PSP2 released fall '09. Graphically, it's basically the same as the current system. UMD drive ditched and replaced by 4-8gb on board flash memory. Other upgrades: 2nd analog nub, touchscreen, blutooth, motion sensor. Design: Flip-style or slider. Size: Think Iphone. Cost: $199. Will be profitable on day 1.
