I would be option 1, with few additions :
- The next one won't be before at least two years, until there ARM 400Mhz will be cheaper (my PDA is 566Mhz already !) and we could have a stronger CPU power, in addition to a cheap and energy-efficient rudimentary 2D/3D accelerator.
- No second CPU please ! Most of us aren't professional devs, we neither have the time, the skills nor the number of people software companys do have ! One CPU is much easier to code, even if they are more smartly linked than the two on the GP2X.
- A 640x480 screen would be great ! Could be a bit expensive though, but would definitly worth it. For emus, the hardware can resize without perf loss anyway, and 200x2mhz can read & resize movies of even higher resolution, 400Mhz being better than 200x2mhz, movies could be played in high rez.
- No proprietary batts please ! With 2 Li-on AA we already can each something like 10 hours full charge. Let's say that 400Mhz use as much as 2x200, and that FPU + GPU would use as much power as all the other hard (backlight, screen...). I am deliberatly overestimating the power-usage increase, but still we could have the same/better battery life with 4 AA instead of 2.
- No Wifi or any other wireless device ! It would increase the price and the power consumption for little to no use. Maybe an officiel accessorie via USB or SD port for those who really want to play online, but I'm sure most people don't care about it.