Personally, I think the biggest advantage Nintendo has over Sony and Microsoft in the upcomming generation is that Nintendo has (pretty much) free reign to do whatever they want to do ... There (obviously) are some limits (like Nintendo won't take large losses or release an expensive system) but they have a much wider range of possibilities when it comes to processing power and features than Sony or Microsoft do.
What I mean by this is that Sony and Microsoft have fallen into a "Trap" of focusing the value of their systems on their technical performance which makes it very difficult for them to release a modest improvement over their current generation system and keep their existing users; in contrast, Nintendo can choose to release something similar in performance to the PS3/XBox 360 or they could produce the best system possible (for $300), and (pretty much) anything in between.
Now, I personally think Nintendo will continue to "dominante" in the next generation because it will be a very evolutionary generation. People will be looking to buy the "New Wii" much like how people were/are really excited to buy new iPods regardless of what the competition offers.
