OK, its the age old question, even more controversial than Holden v Ford. What's your preference and why?
I personally have gone with a PS2 because of the games, Love Ratchet and Clank series as does the son, daughter loves Eyetoy and Singstar. Kids aren't old enough for Halo, etc and I'm not into shootemups like I used to be.
Only downside is I use it for a media centre as I can play DivX on it with the chip I got, would love to have a hard drive on it, can get one installed but would be nice if it came with one like the Xbox.
Interesting looking at the specs for PS3 v XBox 360, PS3 looks to have the better specs but the XBOX 360 will be coming out first giving it a better advantage.
As far as handheld games my daughter has just bought a Nintendo DS, I was spewing as I wanted her to save up for PSP but she wanted the Nintendogs.

Heaps of downloadable PSP games on the net but a 2gb Sony Duo Stick would cost the earth. You can get a Flash/SD Converter for the Nintendo DS but buggerall games on the net.