I don't think a PSPhone would have been a bad way to go. Something like a souped-up Xperia Play might have done well.
But since they are where they are, I don't understand the idea of going so far in on the small indie games. It's like app quality games (minus app level pricing) on a non-convergence device. Where's the appeal in that? It seems contrary to the whole prospect of the Vita, which is the ability to play something very close to current gen console quality games on the go. The only explanation I can think of is that no third parties want to make a serious investment on the Vita at this point, which is something Yoshida sort of hinted at in his recent interview with PSM, so they're just trying to figure out something to do with the thing.
IMO, they need to just hold their nose and close their eyes and suck that Capcom dick (and as many other dicks as they can stomach) in a last ditch effort to salvage this thing.
