They've pretty much had the same hardware since 2003. Sony is sending themselves to the graveyard. I'm still probably going to pick it up but no way the masses are as interested in a PSP for $80 more then DSi. Sony just fucked themselves with this one.
With smaller no touch screen, even though it screams touch screen (especially these days). Also, no UMD drive, which is understandable, but I'm not going to pay $250 if I can't play physical versions of the original games.
Also, 16 gigs isn't that much these days. It's pretty cheap.