A more comfortably positioned or even shaped analogue stick/nub. I think they could shape it halfway between the current design and a normal stick and sink it into a concave part of the face so it doesn't catch on anything.
Bluetooth would be good for headsets and making the memory stick visible to Macs & PC's for small file transfers. If they made a Mac + PC app for WiFi file transfers that would be quicker, especially if they upgraded to Wireless-G on the PSP.
Further size reduction in all directions, smaller screen with higher ppi if necessary, just like the GBA micro.
No UMD drive - sold seperately as a PS3 accessory used for copying UMD's to Memory Stick, DRM applied just like downloadable PSP games.
Analogue face buttons and dpad.
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