People complain about the 6 hour battery life on the PSP... you're lucky to get 2 hours of gaming on the iphone. Not to mention that people actually use the iphone for phone and email and won't want to without because they drained their batter playing games. And it's not like you can carry around a spare iphone battery

For a lot of people, the lack of any tactile controller is a deal breaker. I tried SF4 on the iphone and while it was smooth and looked great, the control was a nightmare... not to mention my thumbs covered nearly 1/2 of the screen. The driving games that use the accelerometer are a better but you look like a fucking retard when you're playing and you can't play them on a crowded train/bus/streetcar.
Sure there are over 6000 games in the app store but the overwhelming majority of those are complete fucking trash. There's no quality control. You have to slog through hundreds of mini-game, tower defense, 'flash' type games before you find one that might actually be worth playing.
There is a fucking STAGGERING amount of shovelware in the app store.
The first two issues are moot with the ipad... but the ipad is not exactly portable. I don't own a pocket that can fit the ipad.