You're essentially making things up here because the evidence doesn't exist to actively support your point. Contrast this statement with (say) the fairly prevalent accounts of parents being told by clerks at retail stores that they can "save money" by buying a flashcart for their DS. I certainly do not agree that there's a preponderance of evidence that "the vast majority" of DS owners don't know about the ability to pirate games on the system but the "vast majority" of PSP owners both know about this capability and use it.
But again, there's no serious evidence that this is "the biggest" factor besides jumping from correlation (PSP is very piratable, PSP underperformed) to causation. Lots of systems are pirated near launch. Lots of current systems are easily piratable. This is not a unique factor in the PSP's life, which in turn suggests that it cannot be nearly as decisive as you present it. In general, blaming "piracy" for a system or a game underperforming is a scapegoat: it pushes responsibility off of those making strategic decisions and onto an external threat, and I'd argue that that's true here: the problem with the PSP is with design and positioning, not that its software could be illicitly acquired for free.
If we compare PSP in the US and Japan, it's exactly as piratable in both regions, but it's successful right now in Japan and not here. That suggests that, contrary to your explanation, the issue is something else: a difficulty finding a userbase niche or purpose in which the system could excel. In Japan, PSP is successful because of the teen market: kids buy it to play local multiplayer games with one another, and this market took off specifically because of a hit game that targeted this market effectively (Monster Hunter). In the US, there isn't really a "teen market" for such a device the same way and the PSP didn't find an equivalently valuable market elsewhere.
