You know, PCE, I doubt Sony means for PSP to outdo dedicated MP3 players, DVD players, photo viewers, etc.
PSP is meant to appeal to everyone who might like to watch movies, listen to music, view photos, and play games - all in one unit. It does this, and that makes it both unique and desirable. Why does this seem to scare you so?
And please - about the 32MB cards. We've had to buy extra memory cards for every game system save Xbox, so this is hardly a dealbreaker. In any case, I'm sure future generations of PSP will include a sizable hard drive, which will put this argument to rest and make Sony's detractors sweat a little more.