The PSP Go isn't that much bigger than the N900 (closest thing to the PSP Phone). And considering I use to carry a Nintendo DS in my pocket (which is also bigger than the N900)...The PSP has a 4 inch screen which works wonderfully with the games I tried on it. This thing apparantly loses .3 or .5 inches but keeping the PSP Go's form factor.

Most modern handheld gaming systems (Nintendo DS, PSP) and even the iPhone support sleep mode or instant pausing of games. PSP has a switch you hit to put it to sleep (hit it and you resume where it went to sleep). DS, you just close the lid (brilliant! ) and iPhone you just hit the physical button in the front.

And I've been playing portable games since Gameboy (I admit I stuck mostly with Nintendo's line, didn't really play Sega handhelds that often). So there are plenty of great games that you don't see on the console. Though recent PSP games are just ports of console games...

The biggest problem with handheld portable games is not the screen size but the controls. A form factor like this would be great for a gaming phone. Touchscreens IMO are terrible for any serious gaming (I've tried different iPhone FPS..). It needs something more like the Nintendo DS which has physical buttons but a touch screen as well. Hardware keyboards work ok, but its no subsitute for an actual game controller. Now if you had a full sized keyboard like you do for PC gaming that would be different.

You should take a look at the Nintendo 3DS.

Man.. in between a 7-10 inch tablet, the Nintendo 3DS, and the PSP Android Phone version 2 (please let there be a version two since I'm not upgrading from my N900 until Dec of 2011) I'm going have a hole in my pocket.