Emulating a 33 Mhz MIPS R3000A cpu, 3MB RAM and 180k polygons/s GPU with with 16.3MB/s bandwidth (playstation specs) can already be tricky on some games using a Galaxy S with 1Ghz ARM Cortex A8 CPU, 512MB RAM and 28M polygons/s GPU with 4.2GB/s bandwidth (even if it's not used yet in fpse).
Take note of the needed power compared to the emulated system, and that a PlayStation is far simpler to emulate than a PSP taking the hardware away.
The PSP uses a MIPS R4000 CPU @ 333MHz (underclocked to 222MHz at initial release, and unlocked later for a few games), 32MB of eDRAM and 33M polygons/s GPU with 663MB/s bandwidth.
PSP as well as PS2/Gamecube emulation will need a few more generations of phones to be possible. Let's wait a few years and we'll talk about that again with some highly clocked quadcores and 300k+ poly/s GPUs.