Conceptual on Microsoft's elusive project. Check the video.
However, according to the Journal report, the device under development would be for a broad range of uses, not solely a music player, and be modeled after Microsoft's tablet PCs that use a pen-like stylus to input information.
If the ultra-portable pc is the model Microsoft is seeking, it's certainly not going to pan out as the PSP killer. Too expensive. Still, I drool.