There isn't much he can do to make it smaller beyond what he has done with the Slim laptops, I mean he can't redesign the original xbox 360, he can only repackage it in different ways.
Oh, so you want a battery pack? I mean it won't be a handheld still, I don't think a "handheld" with the controller built in for the purpose of holding in your hand to play is a realistic project, just adding a battery and such is easier.
