I wouldn't mind seeing a decent microsoft handheld, but look at the PSP... say what you want about it's abilities, and power, and whatnot, Nintendo owns the handheld market.
Microsoft probably won't put the effort into a handheld because it would be even more of a financial loss than what the Xbox 360 was, and probably won't have the long term ability to get out of the red like the 360 has. Unless it could play Halo: CE flawlessly, and that's bit of a stretch for current times. So a MS handheld is a pipe dream right now.
Nintendo owns the handheld market. Period.