I ignored GBA sales because, as you said, the market is in transition. If you factor in the GBA, then Nintendo probably has like 95% of the market, but the point is that as GBA is phased out, that share is going to drop dramatically. And it is going to be phased out, it's already as good as dead in Japan.
Sony isn't saying that 7 million units were sold, Mercury News is. PSP sales numbers on Wikipedia are according to Mercury News and are echoed in a Joystiq article, suggesting that the Wiki hasn't been tampered with. And although the May NPD numbers don't include PSP, DS was outsold by everything but Xbox and GameCube. Not great sales, I'd say. Edit: In fact it's really frustrating. Right now I believe DS has by far the best (new) game lineup of any system out there, so I think it deserves to sell better.
Of course, there's also the problem that nobody seems to be buying any games on their PSPs. The same NPD numbers contained two DS games and no PSP games. Even so, I hardly think the PSP is dying...yet. If Sony keeps losing in Japan, and if the games keep being a bunch of ports, Sony will eventually wear down.