Killing, no, but I do think it is causing potential customers to wait. The bad thing about this is that less sales on the front-end means that manufacturing costs won't be reduced as quickly. Proprietary memory is obviously going to be much more expensive to produce. I'm sure that Sony will bring down the price when they can.
On the other hand, if it does end up thwarting piracy, at least for awhile, it's hard to calculate what kind of positive effect that might have in the long run. I mean, how many millions has Nintendo spent in court battles all over the world? It seems like a never-ending battle for them, as I've just read about another round of legal skirmishes recently.
I really hope Sony can get some price cuts on memory going in time for the holidays. It wouldn't solve the Vita situation entirely, of course, but I do believe the sales rate would improve.
