I think it's pretty obvious that Nintendo's first party games are tougher to compete with than MS or Sony's but I don't see what the problem for the 3rd party devs is. They need to produce quality games to get sales, if they don't their games won't sell. Compete or die, it's the foundation of capitalism.
As others have mentioned, 3rd party games can sell on Nintendo systems. The N64 and Cube were special cases where both the quality and quantity of 3rd party games dropped. I was just as enamored with Mega Man, Dragon Warrior, and Castlevania as I was with Mario, Zelda, and Metroid back in the NES/SNES days. The NES and especially the SNES also had a wide range of genres to pick from, Koei had countless strategy games like PTO and Liberty or Death, RPG's were a dime a dozen, and both SimCity and Civilization were made for the SNES (important because I didn't have a computer then). Aside from sports games the only 3rd party games I liked on the N64 were Resident Evil 2 and Rogue Squadron if you don't consider it 2nd party. It's not for nothing that most "worst games lists" are heavily populated with 3rd party N64 games like Superman 64, Mega Man 64, South Park, and Carmageddon. The GameCube didn't get as many 3rd party exclusives but PN03 comes instantly to mind as a terrible one. If I recall, Soul Caliber did better on the GameCube than the other two systems due to its exclusive Link character and also being a great game.
I think the issue 3rd party devs are having with the Wii is similar to the problem they had with the DS. Not only do their half-ass jobs look worse on a system that has Mario, Metroid, and Zelda, but they have to figure out how to use new control methods. They eventually got around to it on the DS, they'll eventually do so on the Wii. Their only other option isto lose sales. If they don't make good games than I could care less if their sales are lower.
