Well, casual gamers certainly have a place, and they DO make money for developers, and every hardcore gamer started out as a casual gamer. They just need the right game to get them started, which is why there are so many Nintendo fans despite the consoles having changed so much.
Regarding your points, I think the most important thing for any handheld device is size and ease of use. The PSP could do very well if it's very slim, and is essentially a clone of the GBA:SP but a little wider. Think of a v. small laptop, or a slightly larger PDA -- very thin screen, and a flat panel for the controls and a slot for the games to slide in (likely exposed on the outside, like the Gameboys). The ports could be trickier -- are they ever going to be used whilst playing? If not, why are they included then? And if so, are they going to ever get in the way? The GBA:SP was smart, because, despite not having a headphone port included right out of the box, they decided to keep all of the wires out of the reach of the user whilst playing, so you can link up to something, or use the cheap adapter whilst playing, without having a bulkier unit, or a cable pop out of a weird spot where people usually put a wrist or finger.
Add to the size factor the idea that Sony wants to put an analog controller on the unit, and the unit starts getting bulkier than your average laptop. Sure, they can use a thumb-pad that you simply press in different directions (like a d-pad for 360 degrees), and a few buttons, and they'll have the extra space, but will they be able to make it conformtable?
16x9 with a diagonal distance of 4.5"... well, that means the width (the 16) will be 3.93" at the bare minimum, and the height (the 9) will be at minimum 2.211" and, if it doesn't fold up, 4.422". I'd imagine they're going to make it flip-top, though.
Hmm. That means that, if they make it as small as possible, with an ultra-minimal border around the screen and no extra height or width, it'll just be a little bit larger than a credit card. And if they keep the depth to a minimum, they could make it just a bit deeper than the GBA (if not the same depth, if they keep the media small and use adapters for the ports).
So they could do it; make a small unit that appeals to people on the go. Will they? I doubt it. The walkman was cool in the 80's because it played tapes on batteries. They've tried to reintroduce the walkman numerous times, and have failed each time because either the unit did too much so no one bought it for any of those purposes, or it was just too expensive for what it did. They claimed MD was the new walkman, and named many products in their MD line appropriately. They have the Discman, which, although popular, is upstaged by other brands and, most notably, now by MP3 players, and they don't have the tech yet to create those ultrasmall mp3 players like the iPod at th e same price point. How they're going to make this PSP at a competitive price point without employing their huge proprietary batteries, or their weird memory sticks, or their proprietary media, is going to be interesting indeed.
But not all "all-in-one" products are useless, you know. I have one of those multifunction printers/scanners (which then functions as a copier, since, you know, it's obvious), and it's fantastic. If you take the price of a scanner with the same features, and add it to the price of a printer with the exact same features, you end up with 2 units that take up a lot of space and cost more separately, not to mention more ports used up on your computer. This way, I have a printer without a curved top, and a scanner atop that flat top, which then also has a flat top. The printer isn't useless space, the scanner isn't taking up desk space, and everyone's happy! Similarly, I'd imagine many in the computer world would be pretty pissed if you had to buy a CD burner and CD reader separately
The problem with the game console as multifunction unit, though, is the price point -- there aren't separate lines of consoles available from each company (yet), so you can't get an xbox lite that only has 2 ports, no ethernet port, a smaller harddrive, and no component video capabilities. Similarly, you can't get one with a cd or dvd burner. You get everything on the base unit, which sells at one price, and many consoles release add-ons. But can you tout your console as the "one to buy for all your cd, dvd, surfing, email, gaming needs!" if you can't provide it all right out of the box? People *really* felt burned when their Xbox didn't have DVD capabilities right out of the box, and you can tell that Microsoft has been sort of downplaying that feature as soon as Live came out. I think MS realized the same thing that Nintendo knew all along -- it was too late for DVD, and people already own DVD players, so it wasn't worth the drastically increased ($30 per console!) cost.
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