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Well, I own a PSP and have a 4GB stick to go with it. Haven't regretted my purchase even once, since it was actually cheaper than what a DS+R4/M3+1GB microSD combination would have cost here.
With custom firmware, the PSP is basically a portable entertainment center. I use it mainly to play games, read manga, watch anime and browse internet from WiFi hotspots, in this order. I own a decent amount of PSP games, I have also converted some of my old PS1 games for my PSP (PS1 emulation can be also done without custom firmware, unlike someone else said in this thread), and I also spend time with emulators, mainly SNES and GBA. I use PSPComic to read manga with PSP. Watching anime with PSP is also very enjoyable, and since it uses H.264+AAC in MP4 as the default format for videos, the episodes don't take much space from the stick either (one episode is usually around 40-70MB converted) and it looks very good too. You can even turn softsubs into hardsubs pretty easily when converting.
So I'd say that PSP is a great purchase, if you're into homebrew, since you can do so much with it. And there are lots of great PSP games out nowadays too.
Of course, DS has some great games too, and it's a shame that I won't be able to play some of them, but never have felt that I made the wrong decision when I bought my PSP. Maybe I'll get a DS someday to go with my PSP, but for now, my PSP is plenty enough for me.
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