Piracy does hurt software developers, some more than others, but again that can be overblown. I only have anecdotal evidence, mainly just people on message boards, but it seems at least a good chunk of software pirates would have never purchased said games to begin with. A game pirated != a sale lost. I can't say that's a majority, or even a half, or really any subset, but it's part of the equation. Piracy does help hardware sales though.
Back to the Dreamcast - it had a good chunk of million sellers, and 2.5 million sales of Sonic Adventure out of 8 million total console sales is pretty decent, and probably enough to make the point that piracy was not a major (as in console-killing) issue.
PSP did have an unusually high piracy rate, but it also had a very small slate of good games, especially of the mass-appeal type.