An Arena style of combat would work splendidly on the DS, along with inventory work. Using the touch screen menus could be accessed faster than mouse alone, and the Arena combat system of dragging your mouse around the screen while pressing a button would easily be utilized by the touch screen.

In fact, it might make Arena easier to play, as it would have a more ingenuitive button setup than the computer Arena game!

Sadly, I think we can only dream.....
Perhaps someone with mad skills can make a DS port of Arena to run as homebrew, now that TES: Arena is freeware courtesy bethesda.
I think, my friends, that's the best we can hope for.

Well. I guess the controls could be like this.

PSP-
Walking-Control stick
Attacking- R
Blocking-L
Looking up-Triangle(works for battle front)
Looking down- X
Looking left- Square
Looking right- O
Menu- Select(control in menues would be like XBOX Morrowind)
Pause- Start
Cycle magic- Up/Down
Cycle weapons- Left/Right
Jump- L+X
Ready weapon- L+Square
Ready magic- L+Triangle
Rest- L+O
DS-(Walking and looking around would be the same, but with the Dpad as moving instead of the control stick)
Attacking-R
Blocking-L
Menu-Select (would pause game, navigation would use the stylus)
Pause-Start
Cycle magic/weapons- touchscreen (while ingame)
Rest-Not sure... menu option?

TES would work perfectly on the DS. The touch screen could be used for inventory, stats, and for combat. The PSP wouldn't work so well because there wouldn't be an easy way of looking around.