System wise It still sells pretty decently IMHO for a system that's 5+ years old (depending on where you live, it was released in March in the US and Sept in Europe and what not) but the sales for games are pretty damn bad outside of Japan.

Theres a few games I'm looking forward to that are out this year that will test PSP game sales strength:

Socom: Fire Team Bravo 3
Metal Slug XX
Dante's Inferno (PSP version obviously)
Lunar Silver Star Story
Blazblue Portable
Metal Gear Solid Peacewalker
Persona 3 Portable

Dead or Alive Paradise

I thought there was supposed to be a new RE game but I don't see it listed on Amazon or Gamefaq's release dates for 2010 yet.

There is, but there's no release date or really any info yet.  Most are speculating it'll be multiplayer focused, maybe even a continuation of the Outbreak games.

If they announce it at E3 they can't make the price too high. Or they will end up right in another even worse boat than this one.

It's getting stronger in the east and getting weaker (if it isn't dead already) in the west.Sony needs to release a new SKU aka PSP-4000 with UMD drive.It's dead for me though,just using it as an mp3 player...

Not really stronger in the east either.  It's pretty much treading water there.

Software it's dead for a long time now, mainly in EU where PSP hardware outsells PSP software weekly. Hardware is slowing down , but Sony still gets enough money for every piece of hardware. A PSP2 with a PS3-like piracy protection would be nice(ps3 was hacked but it don't accept pirated games yet, there's a long road to learn how to make it).