I'm really looking forward to the PSP, but it's no iPod, IMHO. For what it is, the iPod is fantastic - all that capacity, great interface, best software (iTunes), etc. Really hard to beat.
PSP looks to be the best portable game console period. That dual screen Nintendo DS just does nothing for me. And the fact that it also plays movies and music is icing on the cake.
But you'll get my iPod when you pry it from my cold, dead fingers. Hahahah.
Matthew