No it's not over-rated. I have one and it's actually better than I thought it would be. Now the IPAD is a different story... it's literally an ipod with a bigger screen.
However even though I don't mind the idea, it would be a stupid move because not many people would be comfortable playing a KH game using a phone (hence why putting Coded on a phone in the first place was a stupid idea)
QFT. I know Japan's cell market's more advanced, but you'd think they'd put it on a system fans can get it easily for. PSP Mini is the best imho, you can play it on your PSP and PS3.