>>34438>>34439More moving parts = more points of failure and harder to engineer.
People are also used to bigger, higher def, and more sensitive touch screens that can be all the interface you use on the device. Space on the thing for buttons and stuff means lower ratio of screen to overall size. There have been attempts at making a folding smart device work but it didn't take off.
That said, the (3)DS is a great design and probably could still sell considering the level of attention the shutdown of the online service was getting. The issue with that type of system is that it's a lot more restrictive on what kind of software you can make for it. Limited resolution, implicit need for 2 separate screens (or 3 technically to do the 3D on the upper screen), has to fit a special format when cross-platform compatibility is the norm.
I think the main reason handheld game systems died is simply that they can't compete with a mobile games since you can play them on your phone, a device you probably have anyway, without needing to buy any additional hardware.