http://www.joystiq.com/2009/03/03/dave-perry-challenges-sony-to-confirm-umd-in-psp-2/

"Wow, son, this s**t just got real. Wait wait, let us get you up to speed with a fictionalized one act play.

Dave Perry, Acclaim COO: The PSP 2 totally isn't going to have a UMD drive.
Sony spokesperson John Koller: Huh? Wha? PSP 2?
Dave Perry, game industry veteran: Exactly.

Now, DP has gone one step further to extend the beef. He just dispatched a Twitter message (or, as they say on the streets, a "tweet") saying, "John Koller is publically questioning my post about PSP 2. So I confirmed with Top PSP 2 developers. John, state that PSP 2 WILL have UMD." Oh snap!"

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This shit just got interesting! Though I think Sony will make a "We have no plans for a PSP2"-ish statement, but hopefully, something cool will come from this!

a psp 2 without umd would be impossible

Dear Dave,

Sony doesn't work on your timetable, you dong.

well done!

I actually got looks from people after laughing while reading that

I would rather it didnt.. UMD is such a piece of crap.. with memory so cheap.. UMD/ DVD are going to be dead soon

If they used another disc format they'd need a LOT more space then the UMD offers, the restrictions of the format is too much to allow for games to take full advantage of graphics of the system and still be reasonably long and good value for your money, though I don't see the reason they don't do the PS1 trick of multiple discs but for whatever reason if it's going to be one disc it needs to be able to hold at least 4GB.

proprietry PSP MS pro duo type of thing maybe...can't be any more expensive to make than UMD's, can it?

A 4GB card is still rather expensive and more then UMDs unless you want 50 or 60 dollar PSP2 games I wouldn't travel down that route.

Does anyone know how much space an UMD holds?

Little over 1gig.