Your also concentrating on gaming systems which are cartridge or UMD based which is obviously removable storage for the games, the iPhone on the other hand would require the games to be synced or downloaded to the phone itself which will be easy enough to do especially with the 8 and 16 GB size. Part of the problem for distribution of the games from third party companies like EA and Square or whatever would be a little more difficult, the games would likely be available through the iTunes store which is kind of a pain since the iTunes store caters mainly to the states and not other countries as much.
Being Canadian I get a limited use of Apple products like the Apple TV and the iPhone mainly because the iPhone doesnt have a carrier in Canada yet and the Apple TV requires downloaded content from the iTunes store which we dont have videos on the iTunes store in Canada yet so I have to go off and get my videos off of dvd or download and convert to mp4 to sync to the Apple TV which is that added step that will take forever. Until the iPhone is more available world wide it wont compete with the hand helds like the PSP and the DS which i own each.
Plus its alot easier to mod the PSP and DS than compared to the iPhone at the moment which is another feature some people look into when purchasing a new gaming system in some cases, not all people but some people.
The potential is there but its ultimately up to the software companies to actually make games for the iPhone if its ever going to compete with the PSP and the DS. I think it'll more along the lines of having functionality for games like you get on a palm pilot like chess and card games etc but wont go too far into games and it will likely stay concentrated around the smart phone features and not as much on the game features, especially with the rumor that Apple is considering releasing their own handheld now, just depends on how that turns out as well.