I think most of us are underestimating the shelf life of the PSP. It's selling absolutely brilliantly at the moment. Next year there's a number of games that can actually carry the system worldwide, which is something I'm not sure we have ever been able to say. God of War and Final Fantasy are huge titles.
On top of that, Sony has stated numerous times they're working on a digital media store. If it actually releases by the end of next year and is set up well, that's gonna be a big draw for this multimedia system.
Finally, there's still probably room for another price drop and/or redesign during 2009 that could continue to fuel sales. By the end of 2009, flash memory would be cheap enough that Sony could introduce an additional slightly higher end PSP model that has built in memory of 4-8gb, which would make it a more viable movie player. So there could be a $150 regular PSP and a $200 8gb model, or something like that.
Sony has never introduced a successor system after just 4 and half years. They're not gonna want to give up the millions of users they already have in order to start over with a new system. So they're gonna do whatever they can to keep the current PSP alive just like the PS1 and PS2.
My Top 5:
Shadow of the Colossus, Metal Gear Solid 3, Shenmue, Skies of Arcadia, Chrono Trigger
My 2 nex-gen systems: PS3 
and Wii 
Prediction Aug '08: We see the PSP2 released fall '09. Graphically, it's basically the same as the current system. UMD drive ditched and replaced by 4-8gb on board flash memory. Other upgrades: 2nd analog nub, touchscreen, blutooth, motion sensor. Design: Flip-style or slider. Size: Think Iphone. Cost: $199. Will be profitable on day 1.
