Increase the screen to 4" (as opposed to the current 3.8", just remove some of the unneeded bezel), a 1GHz CPU (the really old 333MHz CPU is lacking), 256MB of RAM (the PSPgo has 32MB, sad), 854x480 resolution (as opposed to a measly 480x272), a second analog stick (were the current start.select are, just move the srat/select up), 3G wireless, GPS (sync it to Google maps, and give me accuracy within a few metres, and I'll make a damned mounting bracket on my bike for it), and microSD (as opposed to the horridly expensive M2), a good touch screen, and I'll pay whatever Sony wants me to.
I want a full out MID or smart phone that can game =)
I can also completely rely on VOiP fotr calling as long as it has 3G.
The PSPgo (N1000) is cheaper to produce than the PSP slim (3000), but for some reason costs $100 more (16 gigs of crappy slow memory isn't a good excuse). They also need to work on battery life (the PSPgo has the same battery life as its predecessors). Or just make the battery removable (so I can keep 2-3 on hand). Allowing full access of the PS2 library would be absolutely sweet for gaming.
Offer me a phone that can somewhat game, a MID than can barely phone or game, or a PSP that can do both, I'll take the PSP. I wouldn't mind a 3G only phone either.
There's a lot of potential here, and people like me would pay a lot of money for it. Your crappy iPhone doesn't have a analog stick does it?