According to NewTechSpy:
The PSi (interactive) is just 4.5” wide and carries a 3” LCD with 16 million colors. Other familiar features include a tightly squeezed UMD and memory stick duo. Amazingly the PSi has the same pixel resolution as PSP, with 480 x 272, so gaming titles will not have to be reformatted.
The PSi is designed with a nearly unscratchable touch screen that will give users a virtual keyboard in which to enter internet addresses and other duties previously unavailable to PSP users. The rest of the body is constructed of matte finish plastic to eliminate the smudge-laden appearance of its glossy exteriored sibling. The ” i” also gives the PSi the ability to work not just with WiFi networks but with WiBro, UMTS, EVDO, and future WiMax networks via switchable modules that correspond with each system and their sponsors.
This is one rumor you definitely want to take with a grain of salt as it certainly sounds bogus, but who knows.