The point of handheld technology, at this point, has been offering relatively inexpensive gaming that is portable. It hasn't been about technology until now, really. Nintendo's dominance in making efficient, long-lasting Game Boys has given them price control, and market control. Now, Sony is making it about tech, and I think it should be an interesting battle.
The point of making handheld games was to take advantage of that market, that of younger gamers, or those looking to play games on the run. It hasn't been about amazing graphics, as is evidenced by the amount of crap developers churn out, and how few really try to take adavntage of the GBA Hardware.
The point that is made by the PS2/PSP similarity is that, in the end, you're paying $300 to play something you could sit at home and play, but while on the road, or on a plane. Essentially, some may feel that they are paying $300 for portability. People don't buy Game Boys for the graphics, instead buying them because they are a different gaming experience. They're portable, they're different, and very simply it's not console gaming.
So it will go one of two ways, really.
Do people buy Game Boys to play games on the go, and only to do so? In that case, paying $300 to play their snazzy console games on the go would be worth it, and Sony has success.
If people are instead looking for a different experience from consoles, rather than simply portability, are they going to pay $300 for the same type of gaming they'd have on their systems at home? If they aren't, then Nintendo has success, and Sony fights it out with High-End Electronics.
I really can't prognosticate what might occur, but it's going to be interesting.