We could be expecting the next handheld to be revieled this E3!
First, release years of the handhelds:
Gameboy (GB) 1989
Gameboy Pocket (GBP) 1996
Gameboy Colour (GBC) 1998
Gameboy Advance (GBA) 2001
Gameboy Advance SP (GBASP) 2003
Nintendo DS (DS) 2004
Gameboy Micro (GBM) 2005
Nintendo DS Lite (DSL) 2006
Ok, the difference between Gameboy and Gameboy Coulour is significantly large, but at the time, handheld consoles were new, and this is expected, as there were few to rival the Gameboy, there was no hurry.
Now, between GBC and GBA, there is 3 years. 3 years between GBA and DS. So the rate at which the handhelds are being releases, has been frequent. So, we should expect a new handheld by at least 2009, two years from now, and this would make the difference between DS and the next handheld 5 years, longer than with the last ones. But this can be expected, with the DS being at the top of sales charts. So, they could very well be announcing it at this E3, with only 2-3 E3's before it's released. They wouldn't of course have a prototype yet, that would come in next years E3. This would be mainly an announcment, and something like "The controls will be revolutionary even compared to the DS", or something of the sort. They would also announce the code name for the project, which could end up as the final name.
Here's how it could go:
1st E3: Code name announced, a few words to get rumours going
2nd E3: Design showed, as well as new controls, and hardware aspects (graphics and such) revealed. A video of a game being played on it.
3rd E3: Final design, with playable ones for audience to try. Games for it announced, as well as other software, and any final aspects of it. Everything not yet shown.
We can be sure that there wont be yet another improved DS, but an actual new handheld, which will most likely have better graphics (PSP graphics at least, hopefully). Who knows, they may go as far as GameCube game compatibility (doubt it, even if the discs are small, they aern't small enough, and Nintendo want's to keep it cheap).
i could be very wrong. Nintendo might not announce anything, worried they will cause DS Lite sales to drop, as people would be ready to wait (I'm waiting. Still playing on an old DS...). But there is always a possibility.