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if you think that many Wii games will ever approach the development cost of Lair.


I said that Super Mario most likely approaches the costs of Lair. This is hardly "many Wii games". The problem is there are simply not that many non-Nintendo big budget Wii games around so the discussion is a bit mute. This doesn't only include graphics but all the other nice features expected from up-to date games on PC/PS3/360 like huge multiplayer support or the HUGE environment that was delivered by games like GTA4 or Assassin's.

Beyond that, it is possible for developers to control their development costs and to produce games with more modest visuals ... but you also said " ... a PS360 game that looks like a Wii game would be ~ 0"


Exactly this is something called "competition". There seem to be enough developers around who deliver great games, awesome graphics and make enough money. If HD developers in general couldn't make a living, they would make cheaper games. But since many developers can succeed those that can not die.

rather than to focus on something other than visuals


??? If they want to focus on something other than visuals and this produces a better product people will buy it. As I said you always can make worse graphics, this can be done on PS3 or Wii. Besides the Wii doesn't seem to be exactly the boon for innovative amazing third-party titles like Okami or shadow of the colossus so I do not get your point.