The main reason I don't see the PSP beating the DS in the end is the lack of original games. From what I understand, the cost of developing a PSP game is comparable to a console game. So they have to charge more, resulting in a console priced game. This, in essence, makes the PSP the fourth console on the market.
Most people only have a portable as a secondary system, and not as their primary source of gaming. They don't buy as many portable games because of this. PSP games, on the other hand, cost about as much as a typical console game, so the decision to buy a new game carries about as much weight as buying a console game.
Will your average Joe gamer choose to purchase PSP games over PS2 games? In most cases, I would bet not. So what incentive is there for developers to create original games on the PSP if the software tie ratio is lower? What incentive is there to the average gamer to buy a PSP if they already own most of the games available for it?
I'm not counting out the PSP from getting some major exclusive killer app in the future, but it hasn't happened yet. MGS: Acid? Nah. I'm sure that game will sell real well in North America at first, but once word of mouth spreads that it's a card based strategy game, expect sales to plummet. And what's to stop the PSP from suffering the same situation as the Gamecube where so called "exclusives" end up getting ported to PS2 because 3rd parties want to reach out to a larger userbase?
I just think everybody has underestimated the DS, even Nintendo. First they projected 3 million sales, then they raised it to 4 million and now it's 5. Absolutely nobody expected this.