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Ds
It is without doubts that the Sony system is graphically better.
But there is a big but here...
The Nintendo system wasn't developed in a rush... using arm processors made it simple but it is also very clear that alot of thought was put into this system.
The nintendo system has a built in microphone and a touch screen ; also wifi based rf connectivity which means that it has the potential of becoming a very capable PDA as well. Since sony has quite alot of other interests in the field with both its clie pdas and P9XX smartphones, the PSP would never be allowed to fill this niche.
The DS has battery life of 6-10 hours... the PSP has 3-4 hours...
PSP uses Gamecube like media... Gamecube media "on the run" seems like an awful idea - lots of scratches with no way of backing up your games. The DS uses small memory card which are more durable and make it easier to create flash carts for back ups and dev. (Sony also uses memory sticks but those are not meant to be used for games, and 1 gig of memory stick duo, which only holds 67% of the standard PSP media, cost more than a PSP...)
Last but not least, the DS would offer decent 3D with innovative gameplay which would most likely mean that it would be more entertaining.
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