Ok first mistake, I installed the USER libraries of PowerSDL not the SDK.
Hence I couldn't find sdl-config, that has been fixed now.

However when running configure --with-video=sdl --with-sound=sdl it does find sdl-config
but cannot run an test since it cannot find the SDL libraries and also it doesn't detect the SDL version .

I've set CFLAGS="=I/usr/local/include/SDL" and LDFLAGS="-L/usr/local/lib" also tried changing it to the full path SYS:Development/gg/user/local/include/SDL but no luck.