I know you've probably been bugged by people on this before, but how hard would multi-player be to implement? More importantly, do you think that there is enough bandwidth, and low enough lag, to allow a host-client multiplayer setup to be playable? (ie, with one psp "hosting" the game and doing the emulation, while the other(s) just receive screen-captures and send back user-input) Or do you think that distributing the computational workload would be a better approach? (at the very minimum, the audio processor shouldn't be too horrible to move to the client psp(s) )
I have thought about multiplayer a great deal, but I've never made any plans to work on it - there didn't seem to be much point getting multiplayer working before there were a few multiplayer games running quickly and glitch free. Now that MarioKart and Super Smash Bros. are both working reasonably well, there's obviously going to be a lot more demand for multiplayer support. Before I raise expectations and get anyone's hopes up, I should mention that this isn't likely to happen any time soon.
It would be possible to go down the route of having a host psp which performs emulation and broadcasts the screen to client psps. Sony's Remote Play between the PS3 and PSP shows that this kind of 'dumb terminal' approach can work in the right situations. That's with the PS3 doing the grunt work of compressing the framebuffer and sending it over to the PSP. For for a PSP running Daedalus as a host, I'm not quite sure there would be enough spare horsepower to compress the framebuffer and audio and then send it to 1 or more connected clients.
Also, I don't think that it would be possible to decouple the audio processing from the main cpu thread so that this work could be distributed to one of the clients. Although the audio and graphics processing is notionally run in parallel on the RSP (the N64's coprocessor), access is still serialised between audio and graphics tasks so they have to be completed in order. Performing audio processing on a client PSP would just mean that graphics processing on the host would have to wait until the results of the audio processing were received.
The approach that I'd been considering was running Daedalus in lockstep across 2 or more connected PSPs. As I mentioned previously Daedalus can run deterministically if external inputs such as pad input and timing sources are synchronised. What this would mean would be that every time the rom queried the pad status, each connected psp would have to synchronise its view of the pad input with the host. This would mean sending just 64 bytes across the network from the client to the host and back. This information would have to be sent over a TCP connection rather than UDP as we have to ensure that every PSP sees the exact same input (actually, client->host communication is a bit less critical so it may be possible to transmit this information over UDP if it helps improve lag.)
One really cool feature about this approach is that as each PSP would be responsible for rendering its own display, it would be possible to scale up each viewport to fill the display; rather than playing 4-player Mario Kart or Goldeneye at 160x120, you'd be able to play at 320x240 (or 480x272 if you wanted to scale it up to entirely fill the PSP's screen).
As I said at the start of the post, this isn't something that's likely to happen any time soon, but if and when it does happen, it will be amazing :)