They're still around, the good thing is they don't cost as much as they used too. There's not much studio support for them, as many people do not purchase them, but they're still supported.
It's led Sony to think about PSP-TV since support has fallen a lot for UMD's. I've also heard "rumors" (but I don't have any links right now), about Sony giving other companies rights to UMD technology, as well as a future plan to release UMD support for the PS3.
Anyways, my advice...
...if you want a PSP for gaming and movies, they're amazing little machines, just for video watching, than just get mobiTV for your laptop, smart phone/phone. You might also want to consider Sling Box or other such things that are out there.
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