Really, it's a shame that the <a href="http://www.powervr.com/Release.asp?ID=39">PowerVR/ARM</a> combos don't seem to have made any impression into the market at all (unless I've missed it all, of course).
I think that the other problem is that non-GBA handhelds with "faster" ARM cores in them have all flopped so far (GamePark32, there was another whose name I forget).
A standardised CF-ROM would be a good start, but then it might become prohibitively expensive for "indie" developers (like me) to sell in the small volumes that we're likely to sell (or worse, MicroSoft will block it all like Nintendo do for the GBA).
A standardised API (DirectX if you must), and standardised buttons etc, would make it a lot easier for developers (especially with regards to the d-pad because you could not be limited to the lowest common denominator - 4-way).
The main thing is that I'm not sure how well a device like this would compete against a GBA. The GBA is a tried and tested device with lots of games available. Trying to sell parents a "gaming device" that looks very similar but costs more (and adds nothing if you scrap the Word/Excel/etc) isn't going to work, IMHO.
(And if I were making a small gaming device to compete with the GBA, an MS operating system wouldn't be anywhere in sight).
