I think this is a great project.
I have a GP2X running the latest version UAE4all and its actually very good, many games are almost 100% with the right settings @ 240-280Mhz, some fussy games are less smooth. Amiga/16bit generation in a handheld is extra fun over emulation on a PC.
Replacing the gubbins in a dead PSP seems like a good idea, you wont have to think about moulding/design and can hijack Sony's industrial design whilst recycling.
I'll probably get a 2nd batch pandora, but more options for portable Amiga fun is good, I hope this project makes to to completion.