Does the Wii prove that the HD razor/blade model is flawed?

[bdbdbd]

@Richard: Umm... When you're planning to sell anything, you should be planning to sell it at a profit. What Nintendo was prepared to, was record-breaking profits.

Now, a few oddballs in your post:
Nintendo intented to expand the audience, by reaching previous non-gamers and lapsed gamers. If Nintendo had intented to sell to casual gamers, they would still be fighting for the same core market they did last gen and gen before that and a gen before that. I don't know how many times it needs to point out, that Nintendo was after new audience, before people understand it.
Judging by "wanting few killer apps", this seems to be what the core audience wants. Looking at what people say on message boards, assuming they consist mostly of core gamers, all they want is "killer apps" and everything else is shit. This is also in contradiction with "Wii owners buying any kind of shit".

But yes, Wii was designed also for a situation if it flops so, that Nintendo would try to disrupt the industry next gen. However, Nintendo could have made a "powerhouse" console that would've made the required amount of money to keep going to next generation in a case of a flop.