From a technical point of view, the Wii's GPU could do 720p... but to keep everything running fine, textures and other things would need to be lowered down. That's why Nintendo locked the Wii on 640x480. After all, to have that such small form factor, you must not have super-high clock speeds.
Just for an example, remember F-Zero X? It was the first N64 game to run at 60fps... but to achieve this, they lowered textures, models and environments to a minimum.
And I agree with Just_Ben, the Wii has much more to offer than what we have seen.







