While I do not agree that the iPhone/iPod will replace the DS/PSP/Traditional Handheld market I do think it will become an indirect competitor and augment that market.
Ironically enought I just purchased an iPhone Developer's Cookbook and am just beginning to delve into making apps for the iPhone, it is freaking awesome and just as I thought it would be very easy to start and a welcoming environment. Apple really knows what they are doing.
Currently dreaming of: DKC4 or Sonic the Hedgehog 4 (classic 2D platformers) for WiiWare, Smash Bros. for DSi, New Super Mario World for DSi, a Wii remake or true sequel of Final Fantasy Tactics.
One down, hopefully more awesomeness to come.