Welcome to the forums here Picman. As others have written, it is great to have enthusiastic new members here.
I love the idea you have put forward and sincerely believe that it can be done. Your estimate for total cost may be a little low at the end of the day, but as we have seen with the original MiniMig's success (it has been produced and sold commercially in small quantities), if done right and a quality product can result from the idea and work, it will sell.
Making it portable with it's own display and battery power will be a big step forward from the MiniMig's design, which I always said was just the beginning of better things to come in the future. There is a member here that did a case design for the MiniMig that turned out well (even if it was a bit pricey) and I am sure he would be interested in working on a case design for your portable device. Using mass produced parts is the smartest thing to do, so if the entire design could be made to fit into an already existing case and display device, such as the PSP, or some other small hand-held gaming, music, or large cell phone, a new case would not have to be designed. That of course would only work if replacement cases and displays could be obtained at a reasonable cost. But it would make sense to me that replacement cases and display LCDs would most likely be much cheaper to obtain than a new case design for an existing LCD display.
Also, do we really need touchscreen capability? On such a small screen it might not be practical to implement and/or use. Personally I would like to see the form factor a bit larger than the PSP or iPhone/iPodTouch, but that is just my preference and I am not the typical small form factor game player, so don't listen to me.
