I'd say the PSP because it is in less heated competition.

Exactly....

The PSP cannot compete now with the DS and it's pretty apparent that both can co-exist.  The PSP has been quietly selling in decent numbers and now we have a proper fight between the big three (Wii, 360 & PS3), they can slog it out to become top dog...meanwhile, the PSP and the DS will continue to sell unwatched (in a way) while the other fight.

Depends on if Sony revamps the PSP if not then I would say the 360 comes close but doesn't outsell it. If Sony reinvents the PSP then it will smoke the 360.

The PSP will sell much more, for the following reasons:

* it sold more until now  -> bigger userbase -> better 3rd-party-support

* the connectivity with the PS3: some owners of a PS3 will buy a PSP

* lesser competition: only two competitors in the handheld-market

* it's a handheld: most people will only buy one homeconsole per home, but one handheld per person

I would think the PSP - its a handheld system, and should have more "global" appeal than the 360. Plus its selling in all three markets - all it really needs is a good price drop.

I think sales will boom (for a while anyway) when the new model comes out - I expect this Xmas. Lots of existing owners will upgrade, and this will flood the market wth 2nd-hand old-model PSP's. Also depends if Sony can bring out some more excellent games (GT Mobile yet to come...).

On the other hand, if Nintendo wanted to be MEAN - they could MURDER the PSP pretty easily. Bring out the next-generation (high-end) DS, that competes/beats the PSP on every level... more RAM, nicer screen(s), excellent (Wii level?) 3D and more. But this would impact their profitability in the long-term, so no need to do this now - Nintendo would rather make money off software than hardware :) 

I can assure you that mercy doesn't exist in business. If they were able to MURDER Sony's handheld  they would do this. This 35% of marketshare is pretty lucrative even for Nintendo. It's not pretty easily - be sure of this.

I don't know about the lucrative part. You have to weigh the sales increases against price cuts in both hardware and software.

You're suggesting that a lack of power is holding DS back, which I think is wrong. They are restricted only by supply and game selection...

Regardless, Nintendo has stated repeatedly that their goal is market expansion, not "winning" the console race.

i like that estimate, and i think too many people overestimate 360 because they don't take the fact that 360 is only selling really well in 1 territory seriously.  By all means in the US it will sell very well, but it also has great competition in Wii and Ps3.  In Japan even 1 million is pretty high. 

PSP without question. 360 will have a decent showing, particularly in the US, but PSP has enough of a brand in an open enough market and no serious worries in any major territory. If the question were who'd win in the US, that would be a more interesting scenario to ponder, but worldwide there's no real contest.