Comment by ga2mer
Some powerful retro handhelds support Linux loading, such as: Retroid Pocket 5, Mini, and Flip 2 on the five-year-old SD865, and more recently, Ayn Odin 2 (original, Mini, and Portal) on the three-year-old SD8 Gen 2 (which is one version lower than the SoC in Steam Frame (SD8 Gen 3)).
So if we get a native arm version of Steam and Proton ARM64EC, we will essentially already have mini Steam Deck(s), and since you want something similar to a PSP, you can check out the Ayn Odin 2 Mini, it's similar to the PS Vita, but I'm not sure if it's still available for sale, or you can order the Retroid Pocket 6 (available in a few months), which has the same chip, but a better screen and is also small in size.
https://wiki.postmarketos.org/wiki/Steam states that you can simply run the x86-64 Steam client under emulation, in FEX-Emu or Box64. Results on existing mobile hardware seem promising already.