Do you two believe Street Fighter IV and Res Evil: Mercenaries only look a little bit better then PSP games?, serious question.
I own both a 3ds and a PSP (3000 - lovely screen on that thing), and while I can't really comment on RE: Mercenaries, I sure as hell can comment on Street Fighter IV.
Street Fighter IV has nice looking character models as long as you don't look too close. The texture resolution on the characters is horribly low res. The Stars And Stripes tattoo on Guile's arm is reduced to an almost uni-colored blotch on the 3ds. The static backgrounds fare even worse, with some seriously hideous floor textures and almost no actual geometry in the background on top of it all. The game gets a lot of mileage out of its art style, and the high polygon count and the normal mapping on the characters really makes them look solid and weighty despite the texture resolution. In 2d you also get some proper anti-aliasing along with the 60 fps. Nice depth of field effects during the pre-fight animations as well.
The game does quite a few things I haven't seen on the PSP, but it seems like a lot of detail was traded in for the sake of snazzier effects.
Tekken 5 Dark Resurrection on the PSP for example completely blows SFIV out of the water in terms of texture resolution and the tremendous looking backgrounds. It also runs at a higher base resolution and achieves 60 fps despite the the 222 Mhz clock speed of the PSP CPU. (it even has comparable loading times). The SFIV visuals are pretty much saved by its art style.
Next on: Ridge Racer. PSP wins this almost hands down. The 3ds version really hurts from the lower resolution (the colorful visuals and the long straights really make for some horrible aliasing here), the textures and the texture filtering on the cars is a joke, the framerate gets severely choppy on some tracks (even in 2d), lighting seems a bit weaker as well. The cars are a tad more detailed but that's as much as I will give that version. I was really disappointed with this game.
Next up: Dead or Alive Dimensions. Once again, Tekken DR compares very favorably here. DOA has some really nice looking stages, and some excellent textures here and there, but there are just as many stages that look no better than DoA 2 on the Dreamcast. Probably worse. (and no single stage in DoA is as pretty and detailed as Tekken's Snow Castle. Unlike some people claim, DoA D is a far cry from DoA3 on the old Xbox) The characters look nice during the pre-fight animations, but once the fights are going, very little of that detail remains (physics driven assets that are not boobs, like hair and skirts for example, look particularly bad). Sure, the Tekken fighters aren't quite as detailed during the actual fights either, but the very nice texture work remains intact. Hair and clothing looks a lot better as well. Once again, the higher resolution of the PSP screen helps more that you'd imagine. Having 30 pixels more vertical resolution goes quite a way when it comes to displaying character models.
Last but not least: Zelda. Nice looking game. Very charming visuals. Kingdom Hearts Birth By Sleep blows it completely out of the water, though.