Although there is some overlap between people who own a Nintendo DS and the early adopter techie crowd, a large portion of people who are interested in conventional handheld gaming devices are not the type of people who would buy a high end phone or MP3 player like the iPhone/iPod touch. Even though it is not fair to say that the Nintendo DS is a product that is only for children, no one can ignore that children under the age of 13 make up a large portion of the DS' userbase and no parent in their right mind will buy these children a $400+ phone/mp3 player; on top of this you also have middle aged and older gamers who may not be comfortable with complicated devices like the iPhone.
Now, the demographic problems will (start to) go away as devices like the iPhone and iPod touch come down in price but then the secondary problem comes into play ... As time goes on competitive devices in the phone/MP3 player market are gaining support because they offer a similar feature set at a more competitive price, and 2 to 3 year old iPods/iPhones have very different capabilities/featuresets, which results in a very small set of devices with uniform capabilities. As a developer you really don't want to be working on developing a product where you have to target dozens of user-interface variations and dozens of hardware architectures when there is a single device that has a similar userbase.
