According to the source, the "PSP 2" will feature a compact form and a full-sized touchscreen. The touchscreen can supposedly be used to play simple downloadable games, and will slide open to reveal dual analog stick controls and other standard buttons.
As in the case of recent similar rumors, this version of the PSP would not contain a UMD drive, instead relying entirely on digital distribution for game sales.
SCEA director of hardware marketing John Koller has consistently emphasized the company's interest in digital distribution, while noting that no new PSP developer kits have been distributed, indicating that any upcoming revision will still be based on the existing PSP hardware.
It is probably unlikely, but it would be nice to see a price drop since it is losing the cost of the UMD drive and because of that will not be compatible with any current titles.