I think he meant psp1. Not the ngp. Right now there's games with similar graphics as PSP1, like Monster Madness and Dungeon Defense. But the psp has been out for a long time. The games with the best graphics on that system like God of War and MGS Portable Ops has really optimized the system to get the very most out of it.
In time Xoom (and other Tegra based phones and tabs) should exceed the graphics of PSP. IMO nothing on the Xoom blows the PSP out of the water yet.