I think the general impression at the show is that the DS is more highly anticipated. While the PSP may be the handheld equivalent of the PS2, the DS allows a lot of possibilities for new types of games, and for making menu-heavy games like RPGs a lot simpler. While the touch screen turned out a lot better than I would have thought, I think a lot of people are as equally impressed with the simple multiplayer connections and possibility of voice chat over WiFi. Heck, me and Ty had a blast with freaking PictoChat -- if Nintendo takes my suggestion and includes that with the system, I think they'll see a huge surge of interest.
As far as better graphics goes, it's not a real issue. Competing handhelds have always had better graphics than Game Boy, but that hasn't gotten them anywhere. While the DS isn't quite as jaw-dropping as the PSP, it's a lot better looking than I had expected, and more importantly, it can handle the same type of level designs - and thus the same gameplay.
I have to admit, while Nintendo has had a lot of wacky quirky things the past few years, this year, they've surprisingly all been worth it. They're showing off a lot of great demos for the DS. Odama - the military pinball strategy game - is incredibly fun and challenging. DK King of Swing is turning out to be a wonderful puzzle game, and DK Jungle Beat is just wild pick-up-and play fun.