I understand what you're saying, but you make it sound like it's bad to make a profit off a product.
Maybe they can make it for 120$, but that's only the parts, right? There's still the cost of labor, storage, transportation and probably a lot more. And developing a new machine, even if it isn't really revolutionary, still costs a pretty penny and those development costs have to come from somewhere.
I agree that it's now Sony's duty to show some good stuff, because competition is the best way to get cool new stuff. (I'm very very sure that Vita will get a lot of ports, too though...)
Need something off Play-Asia? http://www.play-asia.com/