If you'd ask me before I owned my Vita I would've said 'no way' that they are just not powerful enough but after playing Gravity Rush and some other graphic and action heavy titles I take it back. If the 3DS can do the same then I say you can definitely pull it off on those councils. The touch pad on the Vita is perfectly functional and responsive and so is the back pad so I have, no doubts on the hardware's ability to perform.
As for the kind of game that they'd make? There are more than just one possibility, they could make it a standard DMC title, a sidescroller like Viewtiful Joe, a fighting game, an RPG that focuses on story, and so on. Really, I think they'd have no issues with ether the concept nor the hardware, but I still don't think they'll do it.