[citation][nom]anamaniac[/nom]1024x768 AMOLED, [/citation]
You must really REALLY like bulky, expensive devices. Go buy an iPad.
Now, here are some reasons why your idea is stupid:
1) 1024x768 has a 4:3 aspect ratio. Most games are now WIDESCREEN. (Meaning 16:9)
2) In order for a 1024x768 screen NOT to be bulky, it would have to have a stupidly high pixel density, and even then, the screen would likely be quite narrow, probably along the lines of the current PSPgo.
3) FWVGA resolution is where it's at. The Droid has it. 854x480 ftw! (There is no need for stupidly high resolutions like 1024x576 or 1280x720 yet, at least not on a mobile device.)
PS3-like graphics are still out of reach for mobile devices, though at lower resolutions like 854x480, I would NOT be surprised at all to see good looking games that look like Halo 2 and Far Cry: Instincts on the PSP2.