With a 6' screen, full OS, camera, and 3or4G, the PSP2 could be good competition for the iPad, especially for people who feel the iPad is too big or doesn't offer enough functionality.
TabletPCs will soon catch up to laptops in terms of power just like laptops caught up to desktops. The only thing they'll be missing is the physical buttons needed for gaming, which is where the PSP2 comes in; 6 or 10(D pad) buttons and a touchpad to emulate a mouse.
With even power (if it is as powerful as the X360), the PSP2 may even be able to play PC games reworked for its button configuration. It all depends on implementation and public reception.
Edit: For point of reference look at the Samsung Galaxy Tab, which has a 7' screen, and in the U.S it's wifi only. The PSP2 is right in that range, and may even have the 3G that the international SGT has.