I own a PSP, i have a 512 MB Memory stick, and some Homebrew games on it.
The PSP is great for all your Multimedia needs, Video, Photo and Music, i use the Music and Video option alot.
I can put Weekly TNA Impacts on the Video option, and then i just put my House and Trance music on.
But when it gets to the Games its a major flop for me, it made the flop worser when i Played Mario Kart DS, and i realised that MK:DS just thrashed all the PSP Games by a mile, the Homebrew thing is cool, but the problem is that it's just Useless Operating Systems and Emulation (Which i dont really enjoy, thats when i started a Retro collection ).
Overall the PSP is good for MultiMedia, but the thing that matters the most in a Console is the Games, which flop hard with the PSP.
If M$ were to make a Portable consoles, they would have to focus more on the Games, rather that MultiMedia.
Also, wireless communication to the 360 would be awesome. (Play 360 Games on the Portable, and look at your stats on the screen, would be Awesome!).