The thing is we both agree that carts would be a great thing for Nintendo to use on another console, we just disagree on why it isn't happening.
it's just that PSP isn't a viable alternative to DS for software sales because software DOES NOT SELL on PSP outside of a few franchises such as Monster Hunter.
3rd parties aren't gonna complain about the only system actually making them money, that they then turn around and use to release console-like PSP games that they hope will finally start selling (60million PSP units out in the wild), but never seem to. PSP is great hardware with shitty software sales. People buy it for gaming, but not games they intend on buying. People buy it for movies, but not movies they are buying on UMD's, people buy it for media playback in general, but not media they are buying from PSN or Qriosity or whatever their music service is.
PSP doesn't have the ecosystem that DS has and that is why carts on the handheld work without complaint. Money is being made and everyone is content, but that doesn't mean they wouldn't jump on an optical with the proper ecosystem should one actually exist. Doesn't mean they would abandon Nintendo's money printer, but they may put favor towards something alternative format if their was one. Good thing is that NGP is using carts too, so that will be one more manufacturer moving towards making the flash format cheaper sooner, and no better company to do that than Sony.
So even though carts are not a viable medium at the moment, doesn't meant that it won't be maybe in the next next gen(Wii3) or the one after that(Wii4). Problem is that it will never be as cheap as the disc alternative and therefore 3rd parties will probably always prefer it to a cart format of same storage size.