PSP has Monster Hunter in Japan, it's not going anywhere over there for this year at least. Not to mention they still have some new game being announced.
Though, what the PSP has in it's favor here is that most JRPG fans, this game's target, have PSPs. They likely won't be tossing them either. It can still work.
My guess about the 2 UMD problem would be the transition. They've done it with PS1 games though, so... I dunno. Maybe UMDs have some weird thing going on about that.
EDIT -- Eusis hit a pretty big point though, PSP has an obscene piracy problem. Even then though, XSEED seems to have a pretty decent committed buyer base.