While we're speculating, why would MS 'merge' with Sony? If MS weakens Sony enough through attacking it's Playstation brand, maybe Sony's stock dips a bit. Sony's market cap is around $40B, and MS has somewhere around $20B in cash(not counting M&A money.) Who's to say MS's intent all along wasn't to soften up Sony for a hostile takeover bid? They'd need to raise around $20B-$30B, but with a big name like Sony, I'm sure they wouldn't have a problem. That's how MS diversifies and moves itself into conglomerate status like the big boys such as GE.
They have been making noise about getting into consumer's living rooms, right? What better way than to buy the people who make the TV's? It has nothing to do with Nintendo and everything to do with Sony. The Wii was just a nice little gift to MS to move the process along faster.
Now THAT is speculation. It's actually pretty fun. :)