It really depends on what the new GameBoy is.
If it's a completely new system that tears away from the Gameboy line and ventures into a different world (ie using disks), then I think the DS can survive. People will buy the new Gamboy, but it's the DS that keeps the backwards-compatibility feature that the Gameboy line is known for. I also think that anyway you look at, yes, the DS is just keeping attention diverted from the PSP. But, and this is a big but (no pun intended), the DS with it's new founded attention will allow it to continue even after the Gameboy is released. Those developers that can't afford to develope for high-powered console/handheld hybrids, can develope for the DS; a good alternative that provides a unique gaming experience. It also really depends on what can become of the DS, in terms of this new gaming experience. The PSP and GBE will bring the type of play already seen in consoles today; this is the DS's key to survival. It must show us something incredibly fun that can't be replicated on other consoles; a killer app in different gameplay, of sorts.
My theory is the new GB will use the mini-disk employed in the GC. This allows for the DS to keep it's backwards-compatibility with the GBA as a main purchasing factor. Nintendo (I hope) really thought out including the GBA slot. It at first makes them appear like they were puffing smoke, calling the DS "third-pillar". The DS isn't a GB, but looking at it's BWC, it's looking like one. People un-aware will take it for a new GB, and buy it as such. In Nintendo's book, that's great. It attracts attention away from the PSP, and slows down the eating of their marketshare, while still allowing the GBA to live on. The PSP essentially did the samething, but used confusion to attract sales. People are making the mistake of thinking that the PSP is actually a Portable PS2. It's not, yet it's gaining sales because of it. Nintendo can claim console-capability as fact and use that to their advantage. Add this to the backwards-capable Revolution, and you have a very usable piece of hardware, unlike the PSP. Also, Nintendo needs to release the new GB to directly compete with the PSP to completely irradicate it, and soon for that matter. The PSP will keep eating the marketshare, and there's really nothing the DS can do about it. They don't want to kill the DS though, and releasing a beautiful piece of GB hardware too soon will. The DS needs to mature into a great alternate gaming experience, for it is the answer to a very important Nintendo-made question.
That question is: How can we (Nintendo) keep attention away from the PSP long enough to ready the launch of the new GB, and at the same time keep two systems alive, when one is incredibly more powerful than the other? The answer: Launch a handheld that provides a very unique gaming experience, so unique in fact, that it can't be replicated and that it'll survive the stress caused by new handhelds that are essentially a super-upgraded GBA. Nintendo evidently thought about this alot. What can provide such a unique experience that it'll attract attention regardless of the appereance of super-handhelds? DS was their answer and we've all ready seen it competing well against the PSP. It'll only grab more attention with new titles, online functionality, and *gasp* PDA functions. The DS can also expand the market, allowing for two handhelds to coincide. It was a great answer to Nintendo's own question. It all comes to how Nintendo markets both now. When, where, and what capabilities, are huge questions that need to be thought out very thoroughly. If Nintendo rushes the launch of the GBE, it'll kill the DS before it has grabbed enough attention, in other words, matured. Same is true if they wait too long, the PSP will eat away Nintendo's market share for every month they don't release detials about the upcoming handheld. Nintendo needs to blow away the competion with a stellar DS show. Show us everything it is capable of and give us examples (games and such) that use these functions. Make people want the DS, for only then can it really slow the PSP's market-share grabbing. The DS must thrive this year (christmas especially).
Your probably wondering why they didn't just ready a new GB to launch with the PSP. Why release a system who's main function is to take away attention away from the PSP? Why not launch the GB in the first place? If the PSP is any evidence, it would of been terribly in three categories: Battery Life; Controls; Durability. Nintendo (I think) is perfecting this system as we speak. They are trying to get the most out of the battery life, while trying to keep the controls akin to the GC-controllers. That is why I don't expect it to release for a while. I do think though that it'll be revealed either next year at E3, which may be too soon. Two years from this years E3 sounds right. The DS in actuality has three main goals: Attract attention from the PSP, weaking it; Expand the market; Provide a unique experience, to allow it to live side-by-side with the new GB. 2 down, 1 to go!