Maybe but imo its by far not the same market.
A lot of people which bought the Ipod Touch would never even think of buying PSP or NDS as an alternative because they arent looking for a real gaming device.
For me they are mostly not in the same market. Ipod is a music/video/Internet device FIRST and gaming device second. And PSP/DS are gaming devices first and the rest second.
If you want play intense games like God of War ,GTA or Mario, Zelda you need a real gaming device. Mini games on the go are a thing for Ipod/phone. Aslong as Apple doesnt work out a real solution for the buttons without destroying the design they will never compete with the PSP.
Ofcourse they share some parts of the market with Nintendo because of the touch interface for example educational games cooking games puzzle games and so on. People who would buy a DS for things like that could also end up with a Ipod touch.
