Honestly, I think Sony's best bet for PSP now is to throw it to Ericsson for a collaborative integration into their phone line. Low cost adaptation could give PSP a second lifecycle, and I'm sure game makers would be thrilled to have the opportunity to sell in their wares to a new audience. Have a variety of models, with a variety of features, at a variety of pricepoints, but maintain your one games standard and I think it could probably do pretty well.
They could even do system wide upgrades in the transition (touchscreen, 2nd analog, processor upgrades) so long as it's fully backwards compatible with the old software (which could be resold digitally). Think kind of along the lines of GameCube to Wii for an upgrade path.







