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Twistedpixel said:

Nintendo are certainly developing a next generation console at the moment and they are sure to be paying particular attention to the interfaces brought forward by Microsoft and Sony. So without paying any extra money for development or testing they get to see two alternative implementations being tested and brought to market. So instead of designing and releasing Wiimote 2.0 they can instead release Wiimote 2.5 when they finally release a next generation console.

Making an interface is harder than making a console which performs at a decent price. For performance there are many off the shelf solutions available and the pain has already been borne by developers and publishers to create an effective toolset for the creation of high definition assets. However the interface is another thing entirely and the onus on this is entirely on them to get right and to improve upon both the lessons of the Wii and the lessons learnt from Sony and Microsofts copy-cat attempts.

Nintendo already addressed Natal saying that they did testing on a similar concept and found that hands free just wasn't what people wanted. Who knows though, MS have a way of making things popular. As far as Nintendo is concerned though, they already have the M+ and I just don't see how they care enough to even pay attention to the Arc. The 'mote is good for what it is. Easily produced, cheap, and popular. I'm quite confident that Nintendo had the M+ just laying around until the competition decided to enter the motion market. Now they will just focus on other peripherals, like the vitality sensor.