No matter what graphics chip they're using, it is imperative that the PSP2 is backward compatible with its predecessor. They have 250 digital downloads up there now, many of which are great games and proven hits. There's no point in throwing all of this under the bus just to start with a clean slate...especially not if they have to compete against the enormous software lineup on iPhone and iPod Touch, and whatever DSi (or DS2) manages to have out by then.
Also, as tempting as it is to have PS3-quality graphics on a handheld, I think there are bigger breakthroughs to be made in other areas of gaming. If it were up to me, instead of a graphically astounding "PSP2" with a completely new software library, I'd rather have a "PSP 1.5" with a persistent connection to the wireless Internet--and by extension PlayStation Network--and be able to take advantage of all of the media, communication, and social connectivity features that PS3 owners are enjoying...even if the graphics and sound had little or no improvement.
To put it more succinctly...the next Sony handheld should replicate the PS3 experience in your pocket...but the "PS3 experience" I speak of is not necessarily the "graphical experience", but rather the "networking experience".