What about when Sony decided to add two analog sticks to the PS1 mid-generation? Same thing right?

Also, the Atati 7800 was also backwards-compatible with the 2600.

LOL no I'm address the OP not you axum :P

 On paper it doesnt sound to different, but when put into working practise there is a big difference between the two.

Biggest point is this:  Shelling out £25 on a new control pad doesnt seem so bad.  Its fairly cheap, its new, its shiny.  Its on the PS1 so chances are a few million are going to pay out a relatively small sum of cash for it.  So you can Just say "Hey this game is Dualshock Only.  No pad, no play"  Its like Guitar Hero, you need to get a new controller to play it, only its much cheaper than Guitar Hero. No pad, no play, no higher development costs.

Adding a second stick to the PSP means people wanting to have this new control system are not forking out £25, they are splashing around £199 for what is really the same hardware, but with another stick.  People are far less likely to hand over that sort of money to buy a new machine to play one or two new games.

The not so big point is this: Sony is having a hard enough time shifting PSP games outside of Japan as it is.  lets be honest now, the FPS is really the only game style that is goin to make good use of a second stick.  A genre that doesnt go down too well in Japan as it is.  From a business point of view releasing a whole new hardware line of PSP in the hope that western studio start making cracking FPS games for PSP and we all start buying them is just too much of a risk too take.

Nintendo did it with the DSi, so why cant Sony do it with the PSP. There are going to be games that are DSi only, so why cant a few games be PSP2 only?

Well actually there was a converter for the Sega Game Gear as well. It was called the MasterGear Converter and it let you play Sega Master System games on your Game Gear!

http://www.myds.com.au/NewsDetail.aspx?id=493

I never actually owned any of the converters, but I did have a Game Gear and Genesis, back in the day :D

Apart from the obvious PSP2 mistake, Nintendo have not actually done anything yet.  Yes the machine is released with the improvements we all know about, but so far not a single DSi only game has been released so there is no yard stick to measure if this two tier software situation actually works yet.

Nintendo are also in a different place to Sony.  Right now Nintendo are the kings of casual market and the general public are lapping up what ever hardware the big N decide to release.   But the state of the software side of things is a different matter.  Will the casual market really start buying enough games on the DSi to warrent studios to bring out DSi only games?  Only time will tell, but my faith in the casual market is not strong.

What?

Also i do beleive that there are games already in development for the DSi only.

 Im sure there is, but untill these titles are released and their sales are tracked, the sucess is yet to be proven.

Just to throw it out there, the analog nub was never meant for gaming in my opinion, it seemed more like a mouse replacement for browsing the internet on the psp I found the analog nub very usefull for that application.

It reminds me of the black and white buttons on the origional xbox, those buttons were never meant to be action buttons, but yet developers still used it for action buttons, in Halo you used one of the buttons to turn on a flashlight, just to prove my point.

The analog nub on the psp is not meant for gaming, it's meant to act as mouse for browsing on the internet on the psp and for some other non-gaming applications.