I'm in the same position as you almost, except I have to wait a couple of weeks before I get my money.. <_<
Anyway, I have already decided on the PSP. ( Plus, I've already owned a DS before, not Lite though. )
Reason for PSP:
PSX emulation. ( FINALLY, I will be able to play Chrono Cross and Final Fantasy IX on the go. And this time I will probably finish them both.. No, I WILL finish them both! Not to mention, LOTS of games available to play. )
Bleach: Heat The Soul 4. ( I love Bleach, I love fighters. This game has a lot of recent material from the manga. )
Burnout Legends. ( It's like if I have a portable Xbox in my pocket.
)
Metal Slug Anthology. ( Best 2D-action/shooters ever? )
Me and my Katamari. ( I never had a PS2, so this will be my first time enjoying a Katamari Damacy game. )
Loco Roco. ( I heard this game is supposed to be good. )
Megaman: Powered Up. ( Never played the first game, this is my chance, and with upgraded graphics too. )
Megaman: Maverick Hunter X. ( Megaman X is one of my absolute favorite games for the SNES, I can seriously beat it with my eyes closed.. It will be great fun to play the game again with really nice graphics and the option to play as VILE! )
Tales of Eternia. ( I loved the fighting system from Tales of Phantasia on the SNES, and a portable RPG with beautiful 3D-graphics that seems good. )
Rocky Balboa. ( Heard this game is not very good.. But I liked Rocky for gamecube and Rocky Legends for the Xbox, so I might like this one too since I'm a big Rocky-fan. )
The DS have some great games too, but I had it for a year and got very bored towards the end. ( Feb 2007. ) If you want to play online be prepared to play with friends, because on worldwide you will most likely run into little kids that really like cheating.. Action Replays or hacking. Or if they don't "cheat" and you think you will win? Forget it, they will disconnect from the game when there's 5 seconds left and you will not gain any points. ( However, they still lose points, but they don't care as long as you don't get any.. )
So if you want to play on wifi, get ready to play with friends for the most part.
Some great games for DS though:
Mario Kart DS
Tetris DS
Animal Crossing
42 All-Time Classics
Bleach DS
Bleach DS 2nd
Hotel Dusk
Phoenix Wright
Phoenix Wright: Justice for All
Yoshi's Island 2
Mario & Luigi: Partners in Time
Picross DS