We would have a market leader that actually get the proper support where people don't have to get 2 or three consoles to actually take advantage of the generation. 

Its hard to say if it'd be better or worse because there are pros and cons for each possibility.

shovelware would be the same.. because they where around before the wii was even thought of

despite the fact that most generation consoles have released for very similar price points, you make that leap to 1000$ like Sony didn't learn its lesson one year into this generation.

Game consoles would not have become 1000$, and it wouldn't become the graphics wars because at the level this generation is at, future generations aren't going to be ABLE to have a significant leap in graphics. Innovative gameplay and expansion will always take the primary foundation, just as Battlefield and COD have taken control of the HD market. You might argue that those games are teh awsum grapfx, but they are very innovative games; FPS with an RPG kind of slant with leveling and abilities.

Additionally, there would still be an iPhone, and market expansion would still occur, so,

tl;dr

I very much disagree with your comment.

In a graphics war. O wait the HD consoles have been since launch.

Gaming would have moved on though with: no motion controls, less shovelware and bullshit party/dance games and every game would be an online glitchfest with overpriced dlc and no stories. I'm not the biggest fan of the wii but it does have it's value to gaming.

Well there would be very little innovation in the way we play videogames so the industry would eventually get even worse than where it is now, just like hollywood. I am not saying there wouldnt be blockbusters games like call of duty and Halo cuz they will always be there, but gamers that want innovation would get none because its just a matter of creating a game with incredible graphics and then paint coat it with a western look and sanbox gameplay and it will sell like hotcakes even if it plays like an early ps2 game. With the ds and wii we have at least a decent amount of new ips trying to innovate, while in the hd consoles we only get sequels with more but more of the same. Of course its my opinion and if someone thinks otherwise I got no problem with that.

same place- less motion controls

The Wii's already bare amount of decent 3rd party support would get even more scarce

I probably wouldn't have bought a PS3 or 360 until 4 years into the generation. 

Third parties would continue to invest into XBLA and PSN, instead of creating shovelware and niche games for the Wii. 

Arthritis of the wrist would be at an all time low.

Nintendo would fall even further into their desperation and finally give it's audience what they've always wanted, which is an open world Pokemon RPG or MMO on consoles.

Kids would most likely buy a PS3 or 360 instead, but I'd like to think that the DS and PSP would actually even be more popular from a software perspective.

Reggie would be fired (I can only pray for the day).

SEGA might have actually made a good NiGHTS game.

I can go and on, but the conclusion would be that I'd be happier, Nintendo would be sad and Sony and Microsoft would probably be doing as well their doing now, with maybe a few million extra consoles added to their belts.

Extra Addition: Anyone that thinks that their hasn't been heaps of innovative titles and features added to the HD consoles is fooling themselves and obviously haven't been playing many games. I can name far more innovative titles on the PS3 or 360, than I could for the Wii and it's mainly because I have experience with all three of the consoles and so I'm less likely to be ignorant, people should try to follow that example before spouting nonsense.