A trusted source of Joystiq claims Ready at Dawn (Daxter, God of War: Chains of Olympus) are making a new God of War PSP title. Despite the fact that Ready at Dawn previously claimed they were moving away from PSP development to make games for PC, PS3 and Xbox 360. These days it is of course hard to imagine any developer turning down an opportunity to work on a funded project with an existing engine. The bills have to get paid...
It's just a rumour for now, but it sounds very believable.