Sony doesn't have the capability to support a system that is being sold at a noticeable loss, and (hopefully) has learned a lesson about releasing a system at a very high price, so they're fairly limited in how much more powerful the PSP2 can be unless they wait a couple of years to release it.
At the same time, Nintendo released the Gameboy which was (roughly) the power of the NES, followed that up with the GBA which was (roughly) as powerful as a SNES, and followed that with the Nintendo DS which was (roughly) as powerful as the N64 ... I personally expect Nintendo to move the Wii's hardware to the 45nm process, integrate the GPU, CPU and MoSys memory onto one processor, and have it run at a speed where it closely approximates the performance of the Gamecube. I could be wrong, but I have noticed that Nintendo likes to release their Console games from a previous generation on their handheld to produce a large library at a small cost.
