So the bottom line is, yes it could be done with a few sacrifices, but it would end up costing about ~£500 per handheld, which I don't think most people would be willing to pay. We need someone who has a big bank balance to support the project, plan the risk, and buy the components in bulk, and then find someone to make it.
Instead of the all the hassle and costs of the above, the GP2X is a good compromise, and you never know what they'll release in the future