I don't know...for me, it's all about the games, and Nintendo does that way better than anybody else. And I have DVD player, so that just seems dumb to me to worry about if a game system plays DVDs or not.
As for the PSP vs. DS...we don't yet know which one performs better, as the DS is still not quite complete. And what does it matter what medium they choose? Nintendo seems to utilize the cartridge medium really well, and it gets the job done.
Bumnah, companies don't make money off of system sales (they usually lose money), they make their money from game sales. Piracy is really hurting Xbox, hence the decision not to have a hard drive in Xbox 2.