I wouldn't note my current reaction to the present status of the PSP as being *surprising*, but more so ironically exciting. Initially it was obvious that the vast majority would assume that the PSP would decimate the DS. The PlayStation Portable was not only a sexy beast, but a technical masterpiece as well. And when it launched, it actually did obliterate the DS, with not only its superior hardware, but its more than impressive software lineup (yes, PSP has had great games since day one). So no one in early 2005 would of expected that Nintendo would be able to regain its gaming throne, by strategically grasping an untapped market with digital pets and touch test (this was the actual surprise of a generation).
Even with the PlayStation brand being at its peak in market domination, Sony's stubborn attitude became blinding, allowing Nintendo to re-capture the handheld gaming flag and run with it. Sony gave Nintendo not only enough time to revolutionize how handheld games are played, but also conquer the entire gaming industry in a few short years (again, the surprise of a generation). When the PSP finally regained conciseness, the DS had already made it look obsolete (especially after the release of the Lite). In the first half of 2006, it seemed no firmware update (Web Browser, Location Free, Flash, etc..), nor game (Daxter, Syphon Filter, Socom, GTA, Tekken, Field Commander, LocoRoco, etc..) could alter the invetiable PSP-RIP.
To be honest, as much as I adored this sleek portable, I thought the release of the PS3 + Wii combo would finally put that so called "final nail" in the PSP coffin. Although somehow the PSP still prevailed, surviving in this more than suffocated gaming generation. Not only has the PSP became the prime PlayStation platform (standing beyond the PS2 and PS3.. as of now), but it also seems to be slowly but surely proving it's worth. The remaining 2007 lineup for the PSP seems to be one of the best ever (Silent Hill 0rigins, God Of War, FF7: Crisis Core, Wild Arms XF, WipeOut Pulse, LocoRoco 2, Syphon Filter 2, Castlevania, etc) , and with the release of the PSP-Slim, the global appeal of this marvelous platform should be further expanded.
Regardless, the PSP has put us all on a unexpectedly exciting ride (from top to bottom, and now somewhere in the middle). If anything the PSP has been surprised the gaming industry in general. Further pushing expectations, and altering the approach taking by respectable competitors. The PSP has helped further expand a era of gaming that was becoming slowly cliché, and has stapled itself as an everlasting platform for future generations. Even more so, the progressing journey of the PSP and DS will be interesting to say the least.