Because PSP is a great little portable multimedia device, with something like over 20 million sold in 2 years, and stronger sales year on year, with no real competition in the price/performance device market at the moment?
A revised device with better features, touch-screen perhaps for easy use of browsing etc., and such, would be very welcome. Especially if they went with SD (4 GB for <$30!) instead of MemoryStick! What else is there that works as well as a gaming+movie+misc function device? There's nothing comparable, certainly not at the price range, even without an overdue price-drop...