Truth is, 3-5% of systems fail. Even if 10% of the PS1/2s failed (2-3x the typical rate) during the first year, that'd only help the PS1's numbers by *maybe* 500,000 units during its first year, and the PS2 by around 2 million (remember, the PS2 only launched in Japan for the first 8 months before it came to the US, and by then, the correct console revision was nearly done)
Don't get me wrong, I wasn't saying that there were only 2 PS2 systems purchased 50,000,000 times each but 3% to 5% of systems breaking in the lifetime of a system is amazingly optimistic; 3% to 5% of systems breaking per year is probably a far more realistic number meaning that 100,000,000 PS2 systems would represent 60,000,000 to 75,000,000 unique purchases.
Exactly how can Nintendo magically increase their production capacities by 400% for only 1-2 months? These factories are already running nearly 24/7. They would have to somehow either buy/aquire factories for just a month or two, which is not financially feasable. Again, as I stated, this is why companies lower their Q3 and even Q2 shipments to prepare for the mass sales in the holidays.
Its called a warehouse:
a building, or a part of one, for the storage of goods, merchandise, etc.
The fact is that if the Wii continues to sell at the rate it is Nintendo will continue to increas production as needed, will buy/rent warehouse space and most retailers would be happy to take on additional stock in order to ensure they have a steady supply. Technically speaking Nintendo has the resources to aquire extra manufacturing capacity but are (probably) not rushing to 2.5 or 3 Million units per month because they don't want to overshoot demand. I could be wrong but I suspect why it has taken so long to get production increased is because Nintendo wants to ensure that they will be able to ramp up production faster in the future (if needed).
I think you believe that Nintendo buys and owns the plants where the manufacturing and that it is impossible for them to add facilities; generally speaking this isn't how things have worked for a very long time. There are gigantic manufacturing firms around the world which are capable to do intermediate or final assembly of the Wii; to increase production Nintendo gets their suppliers to increase production, these components end up being assembled into other components (if necessary) which are then completed at the final assembly plants. It is really not that hard except that it takes a little time for a company to find a manufacturing firm which can meet their quality requirements.