Nintendo got the system out on the market for profit, and it worked like a charm. I don't think they give two hoots about the average Joe complaning about their system lineup. They did their job by getting one game out at launch, with a few more the following months later. Neither system had good games at launch. Sure some were fun, but they are mostly average. Super Mario 64 DS and Feel the Magic were great games, but nothing to buy the system for. The same applies to WipEout Pure and Ridge Racers. Fun games, but are you really going to buy a system to play some racing games? The PSP beat the DS out in quanity, sure, but half of the launch titles were watered down PS2 sports titles that weren't worth the $50 admission price.
The PSP hype is over and done with, since it launched we've gotten one good game, Hot Shots Golf. The DS drought was bad and all, but hey, guess what? Nintendo had no competition, so they didn't care. Now that developers are finally getting games out the door, the DS is getting treated with a handful of great games like Bomberman, Kirby and Meteos (the DS' answer to Lumines) while the PSP continues to go through its drought. Everyone I know with a PSP is extremely bored with their games, and the majority of them are too casual of gamers to get into the emulation aspect of the system.
I think people are beginning to realize how absolutley worthless the movie UMD's are too. $20 for a movie that can only be watched on the PSP? Hey I enjoyed watching Spider-Man 2 and all, but see there's difference between that and everything on the market - it was free. Portability is nice and all, but movies are so much more appropriate on a TV, or at least a larger screen. Again, I like the idea that I have the choice if I want to buy a movie, but I'd rather just that money go towards a game, or the actual DVD instead.
Scratching the screen to hell? What system are you playing? The stylus doesn't scratch the screen, the delicate PSP screen is the one to be worried about, it's extremely prone to fingerprints, dust and scratches. The clam shell design on the DS prevents all of that.
And maybe the launch titles really fit your interests, but I can't play puzzle games, and sports titles for months on end. You'll understand what I'm saying as this drought continues.
I think you fail to understand the handheld audience. Little kids are the majority of the buyers, and they'll gobble up kid friendly stuff like dog simulators, rather then the destroy all Grand Theft Auto's.