I understand why they are expensive (though $30 for something you can get for $5 is just ridiculous) but my point was that it'll cost quite a bit to have the space to download those games, meaning they aren't really that much cheaper.

Funny, how you bring up Nintendo in PS vita threads, more than Nintendo fans do. 

Still going physical, I love having a physical games collection on my shelves

I know what you mean, only in the PC, have I truly accepted Digital (mainly because PC game cases aren't identical and some come in awful game boxes). However if a title is really rare on PSVita (as in I can't find it in retail), I will really love this option. 

You can transfer your games to your PC or PS3 though, so you wouldn't necessarily need the space to have all of your games with you at all times.

I precisely agree. Given the fragmentation on the PC, I just try to use Steam as much as possible, so 90% of my PC games are in Steam sales, so I have basically gone entirely digital there, but I want it as little as possible on my consoles with their pretty art!

Same here. I love just going through my game collection and looking at the game case and instruction manual. Digital has its advantages, though, especially if you don't have a lot of space, plus you don't have to keep changing the game cards (not really a factor with a handheld, but they're probably easy to lose them).

Yeah, well for PSP I got some nice cases to take just the UMDs, and leave behind the cases, so that space isn't too much of a problem, but losing it could be a problem

I have the fear that this will cause that a lot of games simply won't be offered in stores anymore since I also prefer the physical copy and so far I have already had a lot of problems getting some PSP games in stores, this could worsen the situation.

It's an advantage too though. For example, it's much easier for developers to create something like a $20 game, because they can sell it digitally, but they would have had a hard time making a profit from it at retail.