The bandwidth doesn't have anything to do with the framebuffer
I was implying that a lower resolution means that you can sacrifice quality in several ways. One of the suggestions was to make the framebuffer and textures 16-bit, but there is another factor: the small framebuffer means you can get away with smaller textures.
Early 3D cards plus PCs were able to create rich scenes in 16-bit with half the bandwidth of the Zune HD. Not Xbox-quality games, and not software-renderd crap, but something in-between, reminiscent of the PSP.
And shaders are an additional tool that early 3D hardware lacked, and can be the difference maker because it can add wonderful layers of effects at very little bandwidth cost.
Sony has already proven that you don't have to MATCH exactly the graphics and power of the original system to create a successful portable. The PSP (even at 333 MHZ) is dwarfed by the power of the full PS2, but the games still look good. And it does this with no shader hardware whatsoever.