I think Nintendo could win, but they wouldn't sell 101 million. More like 90 million.

It's dependent on first-party. If Nintendo sucks at getting HD games out in the first two years, they might be in trouble. The price will help a lot, since it would still be cheaper than its competitors. But from a tech standpoint, it's a less unique console. I voted that Nintendo would win, but it's a big if. Have Virtual Console from the start like in real life, and get some killer first party apps out in the first year-and-a-half.

I don't think I've seen anyone say that Japanese developers would absolutely be flocking to Nintendo in this case. With the PS3 lagging behind, why not put a lot of 3rd party exclusives on Nintendo's HD platform?

It is possible to get by with 20 GB on a PS3, and I'm sure the same is true with an XBox360.  You really can't get by with just 256 MB.  Quite a few games require an installation that is greater than 256 MB.  On the other hand, I've never had problems with gigantic installs from Nintendo first party games.  I've never even had to delete anything off of my Wii, Wii U or Switch.  It's not an issue.  When it comes to storage 10 GB on a Nintendo console goes much farther than 20 GB on a Microsoft or Sony console.

This is another reason why a $350 "Wii HD" would be a better value than the $400 XBox360 at launch.  Effectively you would get more storage space, since Nintendo uses their storage a lot more efficiently.

Maybe not for you, but storage on both Wii U and Switch was totally inadequate for me as an owner of both, I've had to expand both by purchasing hard drives/SD cards. I expect most serious gamers will not be able to make do with the paltry internal memory Nintendo tends to offer, which in 2006 would've been even less than they provided 6 years later with Wii U due to memory costing more back then.

And again, a cut to just $100 less than two years in didn't save Gamecube from third place, so even if a price advantage is perceived by some customers, I don't think it would make a significant difference to sales.

Add in Nintendo's struggles with HD development as we saw on Wii U, resulting in crippling droughts of system-selling software, and I expect a traditional HD Gen 7 console from Nintendo would've been lucky to outsell the Gamecube.

The Wii was a gimmick that boomed with casuals, kids and elderly homes. It was a stroke of genius in terms of what they did (sell a roided GC, with cheap motion controls and make tons of money). Had they gone HD they would have faced a similar uphill battle as they did before because knowing Nintendo: they would have gone with a strange media format, would have lagged behind in online gaming, and still would have had a difficult relationship with 3rd parties... Mario and Zelda would have been great though.

1) Some people will get by on less HD space.  These people would prefer the "Wii HD" at $350.  Again I am saying that Wii HD would appeal to budget consumers who wouldn't need the biggest hard drive available anyway.

2) Gamecube and XBox both trailed far behind PS2.  XBox360 faired much better, because it had a lot more multiplat games from third parties.  A Wii HD would get most of the same multiplats.  Price advantage would help Wii HD, even though it didn't help Gamecube, because a Wii HD would have a lot more multiplat games just like the XBox360 did.  Basically Wii HD would get many of the same advantages that XBox360 got.  The Wii HD would not end up like the Gamecube, because the XBox360 did not end up like the XBox.

3) Slow releases plagued PS3 and third party devs throughout generation 7.  Wii HD would be in the same boat as the other consoles.  Wii HD is very different from the Wii U, because it wouldn't be a generation behind.  Given, I still don't think Nintendo would win, but I think it would be a close 3-way tie with Sony getting the advantage in the end.  (Instead of the 2-way tie that we actually got between Sony and Microsoft.)

Gamecube was also power competitive, had a price advantage, and got multiplats. None of that saved it from selling 22 million lifetime. I don't see any reason why a HD successor wouldn't sell similarly.

360 had key advantages over the Xbox that made it sell better, (the explosion of online play, appealing to lost Playstation customers) I'm not giving Gamecube 2 any significant advantages GameCube didn't have, in fact I'm giving it less by inserting the delays and subsequent droughts caused by adapting to HD development.

Why wouldn't a Wii HD appeal to lost Playstation customers?  It's a cheaper HD console.  Why do they automatically have to go to XBox360?  The whole premise is that Nintendo hardware is no longer a generation behind.  We are still assuming PS3 was a big fumble at launch right?  PS3 would still be $500/$600 at launch right?  Those lost customers would get XBox360 if they prefer FPS games like Halo and they'd go to Wii HD if they preferred adventure games like Mario Galaxy and Twilight Princess.

Also, here is why Generation 6 is different from Generation 7.  The PS2 had almost all of the games.  After a quick internet search I found these results for the physical game libraries.

PS2 had far more games than XBox or Gamecube.  This is why PS2 can sell far better than either one, even if Gamecube is a cheaper price.  Price still matters but game library matters more.  Now look at Generation 7.  PS3 and XBox360 have close to the same number of titles.  PS3 actually does have about 250-ish more titles, but XBox360 was usually cheaper to purchase.  When the libraries are that close then price matters a lot.

Since XBox360 was getting a similar number of titles to PS3, then why wouldn't a Wii HD as well?  Making multiplatform games became the norm in generation 7.  If there is a Nintendo console with similar HD specs, then why wouldn't it get a lot of these ports too?  A Wii HD would be very similar to the XBox360 in that it would be a lot cheaper than the PS3 and have a comparable number of games, because of multiplats.  Now add in the Virtual Console and Wii HD becomes a decently viable platform.  It would be competitive to both the PS3 and XBox360.

I would have purchased a Nintendo console but they would have gotten their asses stomped. It would have basically been a repeat of the 6th gen. Even with comparable hardware, there just wasn't enough room for three of the same consoles to eat. Nintendo HAD to be different. By the 7th gen, Sony and Microsoft were the dominant brand amongst the hardcore.

360 would appeal more to PS gamers by maintaining more of the "hardcore"/"grownup"/"cool" image they sought. Coming off the Gamecube, Nintendo's image in this department was poor. And again, you could get a 360 for the same price as a Gamecube 2.

Hardware sales lead to more games; they feed into each other but the former must come first, and I doubt Gamecube 2 would sell enough to get even close to as many games as PS3 or 360.

A large part would depend on when it launched. The 360 launched and was a decent enough upgrade to the Xbox. It had a year to itself and really good online. People still took a "Wait and see" approach because PS3 was showing off games like Heavenly Sword and Fight Night 3. Somewhere along the way, people realized that the Xbox 360 wasn't just another Dreamcast and was actually on par with PS3 and much cheaper.

With the Wii HD, would it launch a year early? Would it launch the same week as the PS3? Would it have comparable online? All signs point to "no". I mean I LOVE Nintendo and I even loved the Wii U but even that console was behind what the PS3 and 360 were offering 7-8 years earlier.