I think that you give Nintendo too little credit. Innovation isn't simply about funding the R&D that results in new technologies - it's just as much about actually implementing and marketing these technologies to make them standards.
Making nonstandard control interfaces central parts of handheld/console systems is innovative. To my knowledge, it's never been done in any serious way, and, if it has, it's never been successful, which makes it even ballsier.
A standard of innovation that requires complete novelty is simply unrealistic - nothing in gaming is innovative. The very first video game ever wasn't even particularly innovative - we already had computers and we already had games, so it was really just an obvious implementation of existing computer technology.
Nintendo is an innovator in the sense that they drive change in the industry. The DS is obviously having an impact, and you're crazy if you don't think that the Wii is going to push next-gen consoles in directions they otherwise wouldn't have taken. Nintendo first party games often create standards that other games then emulate. All of the technology and all of the ideas were there before, but, without Nintendo, they wouldn't have had nearly as much impact.
In short innovation is more than just technological novelty, and is actually a blend of technological novelty/advancment, implementation, and marketing. It's about taking something that's new to most people and making it successful and standard-setting.
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