Far as I know, it doesn't work well at all if the unit isn't stationary, and it certainly won't be on a bus. Would probably work alright on a plane, except for the battery life.
Once I get mine, I'll get a friend to drive me around the block and I'll see how well it works
How often do people fly long enough to need more than 3-5 hours of battery life? After you subtract the periods of time where electronics are forbidden, you can get accross the most of the continental US in that time. Granted, there is the airport and possible layovers and whatnot, but still. Unless you're frequently traveling overseas (I'm sure there are those people, but they're probably the minority) I imagine 3-5 hours is good enough for air travel.
As for phones, what people forget is that most people already have a phone. It's not a $300 expense just to play games, it's something you're already getting for some other reason that also happens to play games. As the power of the phones keeps increasing, they reach a point where it's "good enough" for a lot of people and those people drop out of the dedicated handheld market entirely.
That's true, but I still think people are blowing this out of proportion. I don't think there's a whole lot of overlap in the demographics being targeted by the two. It's like people who play Farmville vs people who play Starcraft. The people who are likely to use their phone as their only mobile gaming platfrom probably wouldn't want to get a dedicated handheld anyway. I don't think phones are taking much away from handhelds; instead, they're getting people who wouldn't game to game, if that makes any sense. It's kind of like how the Wii got parents, grandparents, etc, to play games when otherwise they wouldn't touch a game.