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On a side note, I think that if Sony did essentially the same strategy as mentioned above for the PSP with the PSP2, they would do quite well, probably capturing 40% or so of the portable market (unless for some reason microsft makes an X-box portable; next gen of portables would be the time to do it, power/gen wise)
Sony could relase the PSP2 at a $99.99 price tag, have PS2 level graphics, have PS2 Greatest hits remade for PSP2 for $19.99, and have 3 or 4 PS1 Compilations for $29.99. Also, in my opinion they should take out media features and have all their games be $19.99-$29.99.