Agree!
Sony can´t beat Nintendo on the pure content of the games. They never will be able to. We´ve seen over the past, say, 5 years, how many games came out on the Ps2, and how few of those could compete with Nintendo´s own. Here I mostly refer to platformers, as there are hardly any driving or fighting games on the GCN, but many of them on Ps2. So it will mostly be the same thing on the PSP. It will boast some neat videostreaming features, direct dvd-viewing etc. But that´s got nothing to do with games!
Nintendo keeps their focus on the games, which makes the NDS far more in line with what this is all about: playing games on the go! People already got mp3 and dvd-players at home (not to mention how much the latest mobilephones have of said functions too!), and therefore I think it will be limited what impact those features will have on the overall competitive situation long-term. Then, all it comes down to, is what games the PSP will have, which will be probably as many as will be found on the NDS. Mostly driving games, shooting games and fighting games. But they´re all going to be yesteryear software, whereas Nintendo´s little mobile wonder will be all about new and exciting software which then is the clear winner (the marketstagnation which Miyamoto always talks about, proves that people are tired of samey games, and the PSP will be full of them!!!!!).
Short-term, yes, there will be people who will look on the extra PSP functions. But that´s it! After a while, the genious of the NDS will shine through, and overshadow Sony which will be overtaken eventually in sales by Nintendo.
If anybody is going to sink to hell, it´s going to be Sony! Allthough I don´t wish it for any of them!