I did a search here and surprisingly found no posts about or mention of this system in development. It sounds very cool to me and kinda beats Opcode to the punch. On the site they have actual photos/video of the hardware and demos. It's got Andre LaMothe working hard on it, writing development tools and tutorials for it. No GP32/Palm style emulation needed as a fast Z-80 and 6502 will be built in. Comes with a flash cart(s) to DL new games onto so no need to manufacture carts(YAY). It's a color handheld with planned A/V output to TV. Spare us the "it won't compete with the GBA/PSP" comments as it clearly wasn't intended to do so.

http://www.nanogear.net/index.php

DIY Gaming
XGameStation: Build and program your own games and hardware.

August 07, 2003 - As if it weren't enough that The Phantom is almost upon us, another newcomer has announced its entry into the console market. Nurve Networks LLC today unveiled an unusual console that users actually build and program themselves: the XGameStation. The modular system will allow users to choose from specific features. Individual kits might include interfaces for anything from Xbox controllers to CompactFlash cards to additional ROM memory.

According to Nurve Networks, the XGameStation (AKA XGS) will be sold as a complete game development kit, including a fully-assembled unit, a full-length eBook written by LaMothe, and all the software necessary to create your own games. While this sounds like a hard sell to the extremely lazy gaming community, hardcore players could take advantage of a system that allows them to set game parameters themselves. The book introduces the reader to digital engineering and then gradually explores the entire design of the XGS's hardware, software, operating system, and graphics APIs (Application Programming Interface). The ultimate phase is cloning a donkey.

The stock XGS supports PlayStation controllers and has a PS/2 keyboard port. A/V outputs have not been announced, but one would hope for more than simple composite video and analog stereo audio. However, given that these specifics will be determined by users, it wouldn't be surprising if the designers skipped the fancy A/V.

The XGS comes with a built-in BASIC programming language, which allows for development directly on the system; a separate PC is not necessarily. However, PC users can also program games using traditional C/C++ compilers and tools. The games and applications will be stored on flash memory cartridges.

The company's main idea is to "empower hobbyists and game developers with a game platform they can truly call their own. XGameStation is reviving the magic of programming for systems like the Apple II, Atari 800, and Commodore 64. Unlike systems from Nintendo and Sony, XGS developers face no legal or financial restrictions with XGameStation. There's no official license, no royalties to pay, and no guidelines to follow."