The problem isn't so much that dedicated mobile gaming devices are obselete. I think its more than the 3DS is focusing way too much on the 3D aspect instead of simply as a gaming device. Having two screens was basically a gimmick when the DS initially came out, and it's already gotten quite old. The 3DS is based off of not one, but two gimmicky ideas that have nothing to do with good games. We don't need (any many don't want) 3D. And, while a second screen with touch capability is nice, its far from critical and raises cost while not adding anything significant. The 3DS is just too much like the DS. We don't want to by the same system we bought, what, three years ago? It would likely have done much better as either a more powerful non-3D device, or if it included something new. Much like the DS before it and the Wii, a gimmicky add-on may sell well at first, but it isn't going to sell people the same product twice.
As for price, yes, it's very high, but it's nowhere near the price required for a smartphone once you factor in service. If you don't have service on the phone, it's no different than a subpar dedicated gaming device.