A few things...
1. They would have likely stuck with emulation because that's cheaper. But if they simply used a better emulator or specs to brute force better performance, there would be less complaints.
2. Sony would have to produce new PS1 disks to profit from this route, also the console would be more expensive to put a CD reader in there. Instead the PS1 mini should have essentially been a PS TV. That way you could go into the PlayStation Store and buy many notable PS1 games, PSP, and even play Vita games. That would have been better than the paper weight they created.
3. They also could have just copied Nintendo. Use or create a better emulator, get more definitive titles, add ideally add more features. If the device simply worked like it should, there would be less complaints.
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