"I spoke to a developer who is working on it right now," he said. "I know this developer is already working on it, so that means they have a prototype. That would sound like a fall release to me."
Sony has had a pretty hard time with the current PSP: the media format created for the machine, UMD, has all but tanked as movie format with dismal sales; game releases are few and far between; and overall, the system is being obliterated by the lesser powered Nintendo DS.
This'll be interesting to watch. Complete digital delivery will all but eliminate the used game market (good for Sony, bad for retailers), and could move portable gaming closer into the iPod's arena, with the potential for more features. Still, since Sony has managed to screw up just about everything in its games division for about 3 years running now, who knows what will happen.