Sporticus - all the reasons you gave for why it wouldnt work on the PSP are way off base. (sound & graphics not being good enough to get the player immersed in the game) try putting the headphones on silly !
you logic would work for the DS though, that kids toy is good for brain training but not for a cinematic immersive experience like RE.
and the reason Monster Hunter figures into this discussion because it shows that if Capcom makes a good enough game IT WILL SELL !