I don't see the problem, I really don't.
You would have a compelling argument if this were the PS3, but it's not, it's a handheld gaming device.

No UMD drive means significantly faster load times (A huge issue for the PSP), significantly longer battery life (Another huge issue with the PSP), a slimmer, more light-weight design with less moving parts (And therefore more durable and less prone to hardware failure), and no game cases to lug around - it is, after all, a portable device.

To address your OP, the idea that downloadable games don't drop in price is simply incorrect. The PSN has price drops at a relatively frequent interval, with holiday sales and promotions on a regular basis. Past that, the price of downloadable content is usually far lower than their disc-based counterparts, so this argument you've made is simply a fallacious one.

The only problem I can foresee for Sony is bandwidth restrictions from certain ISP's. That, however, is an issue that needs to be addressed on a far more general basis than the videogame industry alone, and hopefully it is soon.
I also hope Sony is able to find a way to let users install their current UMD games onto their PSP's, that's another essential issue I hope they are able to sufficiently address.

Anyways, it's hardly a dangerous trend; it is already the standard in the portable music industry.
Or do you still have a portable CD player? Maybe an 80's Walkman? I don't know, help me out.

i refuse to buy music without a hard copy and i will not buy games, movies or anything else in such a manner...and no i dont own a walkman or portable cd player what i do have is a cd collection that is also on my mp3...does that help you...if you like the trend defend it but leave the sarcasm at home

And games still sell million on the PSP.

I don't mean to sound offensive, but that's the direction these industries are going.
I love collecting hard copies too. I have a massive DVD/Blu-Ray collection and I even shop around for vinyl when I can. But you have to look at the situation. It's a portable gaming device (In other words, its main function is portable gaming. Movies are meant for and utilized more for home use, and until recently music as well). The only disadvantage to download-only capability - past screwy ISP's - is personal preference. The pros far outweigh the cons.

Most likely the next psp won´t use UMD.

The industry hates the used-game market BUT it is also a matter of getting the game to the consumer. Digital Distribution is way easier to get games to people on a wider scale.

At the Wal-Mart I work at, do you want to know where LocoRoco 2 is? In the bargain bin behind the $5 cheaper LocoRoco. It is a pretty new game and its just thrown where no one will see it.

With Digital Distribution there is nothing to block the game from being viewed and purchased other than willingness to purchase a game.

I do understand teh benfits of downloadable games but theidea of downlaod "only" games means we will end up paying a lot more for games than they should be at (especially after they have been out for a long time). Shelf space is one of the reasons prices get dropped.

If they were charging $39.99 for the game it would bother me but since it's $19.99 downloading only doesn't bother me that much. Yes it does make it so you can't buy used or resell the game but were not talking about new PS3 games here that start at $59.99 new. For those afraid that if it breaks they won't have the game. You can redownload it. If your disc based game breaks or gets a bad scratch it's not as easy of a fix.

no you wont. Steam is a perfect example to prove you wrong. Prices start lower due to lack of need to distribute physical media to retailers, there is no tax (unless the state government enforces taxes on downloads), no packaging cost. When a game is released for $49.99 it stays there for a few months, makes itself a pretty penny, goes on sale a few times, then the price is normally dropped by half or more.

Apple is already there and doing fine. Games you buy on your Iphone/touch are much cheaper than PSP games, but the concept is the same and will work just as well if properly implemented. Steam has also proven digital distribution works, but obviously there are challenges for Sony here. Games on Steam frequently go on sale, sometimes for 75% or more off, so pricing really shouldn't be a big issue. PSN also has sales from time to time.

They could sell retail games for a premium on read-only memory cards.

Regardless, they *NEED* to drop the bulky umd drive to make a desirable hand held. Keeping the umd drive is a liability for the form factor of any future PSP revision.