The problem is scope. All these companies try to add crap to overcome their competitors creativety and originality. Look at the nGage, lets create a proprietary gaming platform that can also be used as a phone, if you don't mind holding the device sidways against your head because we added the phone bits as an afterthought, even though Nokia is first and foremost (and only) a phone company.
The PSPs problem was it tried to be a mobile entertainment suite, but it failed on all accounts. No one wants to buy a separate copy of a movie on a proprietary format for a 6-inch screen nor play subpar games nor have subpar internet browsing, nor do they really care that it can play MP3s when their phone and iPod already do that.
Add on to the fact that new smartphones (and even the new iPod touch) offer similar or superior experiences, for an equal or lesser price, and there's really no market for it. I can't explain the DS's success, but I can understand the PSP's failure.