I think Apple with iTunes would disagree with you. Its not just about letting you play your CDs on the go, its about selling you more stuff. Its always about selling you more stuff.
OK, simplify things. PSP $300+$100 for a memory stick = $400 for iPod.
They aren't the same thing so can't be compared so simplistically, but what the hell.
As was said previously, all the iPod proves is that 'people' are willing to spend large amounts of money on 'stuff', if that stuff does what they want it to do. You can't mix the specifics of the device and its usage up with the PSP - just take the 'willingness to purchase' element
Games are big business, therefore its a reasonable bet to think that people might spend lots on that too. Well at least Sony thinks so.