First of all, the original XBox sold 24 million consoles, compared to 22 million for the Gamecube, so I'm not sure how the Gamecube was only "slightly competitive" with the XBox. PS2 maybe, but the GC and XBox were neck and neck.
Second of all, I don't think an HD Zelda would have had people any more excited than Twilight Princess. It would have been a fantastic game, but upping the resolution doesn't really make it any better.
As for the conclusion, he's basically saying the same thing Miyamoto said - that if Nintendo had attempted to go for the same market as the PS360, the competition might have killed one of them. I suppose it would not have been awful if Nintendo was relegated to software only, but I, for one, am happy that such a fantastic game company is succeeding.
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