The thing is, Nintendo is one of those weird companies that rely on gameplay to sell their systems. To people who've never played their games before but have only looked at pictures of them, many of the games look like crap. However, an hour of Super Monkey Balls, Super Smash Brothers, or Mariokart Double Dash, and you will definitely see why nintendo has such a loyal fanbase despite many of the first party games lacking in the graphic department. Heck, thats pretty much why gameboy outlasted everything else.
Regarding the PSP vs GDS debate, we know that even if the dual screen thing turns out to just be a gimmick, the GDS is still plenty capable a gaming machine without the use of the second screen. As I recall, the system is stated by nintendo to be between the power of the n64 and Gamecube, which puts it only slightly weaker than the PSP. Also remember that we're talking about a screen resolution of around 160x240... c'mon... how much processing power can you possibly need to fill only 40,000 pixels? If anything, the dual ASM processors should be more than adequate for the DS.
It's my assumption that Nintendo DS will probably never use the stylus, touch sensitive features, wifi in any significant game, but rather, they are trying to stress the other PDA-like functions the DS will be using as a selling point. I mean, paying $200 for a gaming machine that has many of the features your iPaq is capable of doing is a smoking good deal.