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Looking at the Go!, without the screen, it's about the same size as a psp without a screen. Imagine what you would be able to fit into a psp if it didn't have a screen. I am guessing there is a harddrive in there somewhere. Either a platter based hard drive or flash based harddrive.
I'm really banking that it's a flash based drive in there, which means they must be allowing for digital conversion of your old UMD games.