I think a Switch Fit would actually be successful due to the Switch's portability and kickstand mode; it would allow people to exercise wherever they want as long as they have their Switch and balance board. I'm not worried about the development resources that would be taken away to create it since it's like between a low and mid-budget game but has the potential to sell millions of consoles to non-gamers.
The problem to me is that if they did make it, it would be like the red-headed stepchild of the Switch's lineup and a constant reminder of the Wii and its branding that Nintendo is trying to kill and bury. So, to me, they either don't do it or create a separate 'quality of life' type brand to put a Switch Fit game in that's advertised (and even sold) separately from the Switch's typical games. Like, even though they'd still have it available in a typical Gamestop, it's de-emphasized there but bundles and individual copies would be prominent in the fitness/health sections of places like Walmart, Kohl's, Kmart, Bed, Bath and Beyond and other places that the product's target demographic would shop.