Stupid question. Of course they are. Companies never stop working on hardware. But today, PSP2 news may have gotten a little more specific, thanks to a report from industry tech website EETimes.
They claim that a recent announcement by Britain's Imagination Technologies - in which the company boasted of having licensed their "high-performance graphics processor core to a major international consumer electronics company" - actually meant Imagination had inked a deal with Sony to supply the graphics processors for a PSP successor. That's according to EETimes' sources, at any rate.
On the one hand, it's certainly plausible: Imagination are also the team behind the iPhone's graphics processor, though the one mooted for the PSP2 - the unannounced SGX55x - is obviously more powerful. But on the other hand...this is some vague, vague stuff.
Anyway, neither party is going to come out and provide confirmation on this, so don't bother waiting for any. Instead, spend your time wondering what this news/rumour even means to you, since it doesn't hint at a release date and concerns a processor that's not even out yet!
Has Imagination added Sony to Apple consumer design win? [EETimes, thanks Bruce!]