Personally I never felt that Nintendo truly believed in the Wiimote/Revolution concept. When they launched the console they intended to sell it for $199 and they included nothing but old technology which had been repurposed. Had they actually believed the Wii was going to sell a significant quantity they would have IMO included more up to date hardware such as a more modern IBM CPU and Radeon graphics chip. They invested relatively nothing into the console compared to pretty much any other console ever released and yet this article claims that they believed in the technology?
They staked their home console market on it. Unlike with the DS, where their uncertainty at its success was apparent from before launch ("third pillar," "not the successor to Gameboy") Nintendo never once demonstrated any ambivalence towards the Wii. You believe that the system's lack of horsepower indicates they were not seriously invested in the Wiimote. I submit it shows they were confident the Wiimote alone could turn a Gamecube into a sales juggernaut.
They staked a console release but they anticipated a much lower release price ($199) and much lower sales. They had confidence enough to release a new console based on the technology but not enough to go without hedging their bets. This wasn't the first time they hedged their bets, they released the N64 with only a single analogue stick when the industry finally settled on two and they didn't move to make any adjustment either after the PS1 obsorbed their innovations.
The pre-release period where developer confidence set the tone of the whole course of the lifecycle of the Wii would have been completely different had they actually bothered to release new hardware. Before the release of the Wii the developers essentially voted no-confidence and moved on to larger projects on other platforms. The only developers who developed for the Wii essentially were given no other choice whereas the developers with some market power decided against the Wii, hence the fact that the Wii was supported by the least capable developers plus Nintendo. Whilst new hardware would have cost more money, hindsight more than suggests that a $299 price point was supportable given the price so many were willing to pay for access to the unavailable hardware.
I beleive there was quote from Iwata supporting this, smth like he beleived in Wii, but didn't exepct it to sell that fast and in such volumes. But it'd better to check with Nintendo hardware forecast at the time if any.
I do think as well that on the one hand they were trying to play safe by lowering hardware devlopments costs, increasing profit margin from every unit sold and even maybe reducing software developments costs - if smth will go wrong business will survive at least, but on other hand it's still was desperate move, that did wonders. People sure did beleive Nintendo were desperate when Wiimote was first shown to the public, I clearly remember this :D
Wasn't able to find exact figure of units sold forecast on Nintendo IR site. But last forecast modification one month prior to launch indicates 15.6% increase in net sales for the whole year vs. 51% of actual result by the end of FY3/2007. So they did underestimate it.
You make some good points.