Holy fuck! That is huge news.
This move will mark a major blow against Sony in Japan, if PS3 was not already doing bad enough, it just lost its top franchise in Japan.
Actually the DS makes perfect sense for the series. The DS is the fastest selling system in Japanese hstory, and at this rate, it may soon end up being the best selling system in Japanese history. Games might sell for cheaper, but development costs are also cheaper. Games also sell very well on the DS, in a matter of two years there are already several games that have sold over 5 million copies. A series like Dragon Quest will sell very well on DS. The sequel to Final Fantasy 12 is also coming to DS later on.
From the screenshots, it looks to be a bit more graphically advanced than FF3 DS.
http://ds.ign.com/articles/750/750590p1.html
"Development seems to be quite far along. The online arms of magazines Famitsu and Gemaga, report that a demo was held at the press conference, with Horii and other guests playing the game live. Dragon Quest 9 features an action-oriented battle system playable cooperatively by up to four players via Wi-Fi. This is the first network-based Dragon Quest, Horii noted. The DS's dual screen setup is also put to use, with the top screen showing a map and the bottom screen housing all the action.
Horii is aiming for a Japanese release some time in 2007. "
More screenshots:
http://www.the-magicbox.com/0612/game061212a.shtml