I've been playing video games since I was 3. Ever since my parents brought home an Atari 2600 with Combat and Circus Atari, video games have eaten up the lion's share of my leisure time. Mostly, it's been a very orderly progression from one system to the next for me: Atari 2600, NES, Sega Genesis, Sega CD, Sega Saturn, N64, Dreamcast, Gamecube, etc.
The portables never particularly interested me. Oh sure, I've owned a few, usually at the tail end of their lifespans, or as second hand retreads years down the road. They usually struck me as, and usually were, just trimmed down portable versions of consoles. It's all well and good if you're commuting long distances, but frankly, that's just not me. I work at home, I don't leave the house unless it's for some important reason, and rarely is such a trip going to leave me with a lot of time to kill. If I want to play console games, I play console games. On a console, on a TV... there was just never any need to settle for second best in the name of portability.
Then something funny happened. I got sick of my Gamecube and its comparative lack of new titles that were really my kind of games. So I did what I usually do when that happens, I got another system... a PS2. Inferior graphics, but lots of games I hadn't played, and lots of them were in discount bins. It probably would've been good enough to get me through to the next generation... but it didn't have to be.
The DS caught my eye. I got one shortly after launch as a Christmas present, but it stayed mostly unplayed on my shelf. Portable... it played GBA games on a better screen, sure, but if I really wanted to do that, I'd do that with my Gameboy Player. Then Pac Pix came out.
Since then, my library of PS2 games stagnated, much as my Cube had... I bought one or two games for each over the course of the next year and really enjoyed them... but that was about it. The DS hadn't just replaced my GBA as my scarcely played handheld, it had actually replaced my PS2 as well.
Then I finally figured out why, and what Nintendo meant by "third pillar". The DS isn't just a portable console like the GBA, or the GBC, or the PSP... it's a unique system that offers unique play experiences that just can't be replicated on a console. To that end it probably owes more of its design to the Virtual Boy.
There's probably still a market for portable consoles... I can't say for sure, being as I was never too interested in them in the first place. That people are buying the PSP inspite of its vapid collection of PS2 knockoffs hints at that though. That the GBA still sells comparatively well despite being positively ancient hints at it as well.
So maybe there's still a reason for Nintendo to make another Gameboy. I know most people see the DS as the next Gameboy, but if Nintendo's really determined to have a handheld that attempts to replicate the experience of playing a console, they can probably do a much better job.
The DS just isn't as good as the PSP at being a portable imitation of a console experience. The touch screen doesn't do a great job of replicating an analog stick... the second screen feels oddly out of place, and usually winds up getting barely used in console knock-offs. Play Madden on a PSP... it plays like a poor imitation of the PS2 version.
If this market still exists, it's silly for Nintendo to cede it to Sony. The GB line has taken on powerful competitors before and always emerged victorious. Maybe the timing just isn't right. Maybe they're just trying to space their releases out so the three pillars can coexist. But I'd be surprised if Nintendo isn't at least investigating the possibility of releasing another "portable console" style handheld in the next couple of years.