The PSP is 170x74x23mm, going by the size of the disc I'd say it's around 120x75x25mm when closed and 120x150x15mm when open flat. If you open it on an angle it then effectively takes a far greater volume.
I prefer my gadgets small (my phone is 80x40mm), so even the PSP is a bit big for my liking, but I think getting much smaller would be impractical for cutting-edge mobile gaming. It seems like a 'flat' design like the original GBA or the PSP provides for a more efficient use of space.