I think whatever success iPhone games have had is due to low-cost and easy, pick-up-and-play games which you could play in short durations of time throughout the day.
Sure the distribution model helps play into this dynamic.
For PSP, the business model is for bigger games, requiring higher development costs, requiring in turn much higher prices.
Sure Sony may experiment with $5 and cheaper arcade/casual games but to keep the traditional 3rd-parties on board, they have to produce hardware which lets you replicate a console-like experience.
But the ultimate question is, are there enough gamers who want that kind of experience on the go? Or are people who game on the PC and the consoles also settling for the simpler iPhone games instead of the kind of games the PSP will offer?
Nintendo won't be threatened because they have so many unique, exclusive properties that they can mine forever. But Sony (and MS if they should get into mobile/portable gaming) may be up against a paradigm shift.