I don't think you are being too harsh - You have set the boundaries with difficult child's well being taken into consideration. You know that overuse is unhealthy and ends in an ugly meltdown. difficult child is 12 years old, he should be able to handle the boundaries.
Don't leave it in the vehicle if it gets hot in the car. It could damage it.
I would try setting it aside for car rides, waiting rooms, and special days. You state he earns time on computer and t.v. Do you ever have problems with him getting off those? Another idea is to pick one day per week that he can have it once school work and any household chores are done. Friday night once homework for the weekend is done, you get to have the PSP from 7:00 - 8:00 (or whatever you choose). If he gives any problems giving it up at the designated time, then he looses that many minutes the next week or does not get it the next week.
