The Go could never fail at its price point. Its not a new product, its just a new form factor -- it probably didn't cost that much R&D to develop.
I would actually say that, given its high price point, the PSP Go is a resounding success. Some people are willing to pay $80 for the new form factor and 16GB of internal storage, while losing the UMD drive.
If the PSP Go had been priced at around $200, I bet its sales would be double or more. No retailer would carry it for that small of a retail cut, though, and Sony isn't going to directly pay retailers to sell them at a loss. The used software retailers damaged the Go's business model, because it wasn't compatible with their own -- but they didn't quell it completely.
The software publishers probably make more than 2x as much per software unit sold on the Go, so the number sold is very misleading, in terms of the big picture. Each one put into the wild likely yields more than 2 PSP-3000s worth of publisher software profit, in the long run, in addition to the hardware profit garnered from the device sale itself. On top of that, Sony gets to refine its pricing structure to fit its demographics well, and now has an active DD experiment in the works. The PSN PSP download library is VASTLY superior to the WiiWare library, after all. If Nintendo and Sony are going digital in the next gen, Sony will have at least one significant advantage thanks to this early experience.
Turning a blind eye to the PSP Go, and pretending that its a "failed experiment" like the GameBoy Micro, etc., is folly. It didn't fail at all. If you think so, you're looking at it from a very limited perspective, and you won't "see it coming" when the future is upon us all.
Selling half the devices, and making twice the profit per device, can be a very good thing -- because there's more potential for growth, assuming the model it uses is prevalent in the future. The PSP Go isn't at that "halfway" mark, but it's good enough to be considered an experimental success, in my opinion.
Honestly, I don't know why Sony doesn't allow retailers to sell PSN cards at a discounted price (via a point system, like MS or Nintendo -- say $20 for a 2400 point card, where 2400 points would cost $24 online), and, in return, have the retailers sell the PSP Go for something closer to $200. Thus, everyone is happy, and everyone makes more money... except the used retailers that is. The big department stores would be pleased, however. HUGE shelf space savings for them to stock tiny cards that net such large profits.