@JL - Holy crap I feel sorry for your keyboard!! 
The way I see it, you're right and wrong. Hmmm... I seem to say that a lot. I totally agree with you that most other competitors don't understand the market and their attempts will fail. But the gravy train that Nintendo is bringing in will inspire some to try at least.
In the 'WiiFit only sells 135,000' thread I predicted multiple competitors will join, just like the good old days when there were 6-8 consoles on the market. But the majority of them will be 'Vii's. Trying to emulate the Wii's success without truly understanding it. But there are some pretty savy business people out there in the world, and there's a real chance one of them will get it right.
As for following Sony/MS loss-leading strategies, any company that does that is a fool, $$$$ in the bank or not, they'll be creamed. But it's totally unnecessary. Nintendo has shown you can take easy to get existing tech, make it fun, make it accessible, make it affordable while profittable and you can have a winner right out of the gate (R&D costs notwithstanding). It doesn't matter how big a market share they take from the Wii, they'll also be profitable and will also be around for the 8th generation where they'll be much more of a real threat. Also, Nintendo will leave so much money on the table someone can get quite rich off their 'crumbs'.
Also I don't see software as a huge stumbling block. Yes, they need to make some games inhouse and they need to be good. But a lot of software coming out on the Wii (and even PS3/360) aimed at the casual market could easily and quickly be ported to any console that shows real sales growth. So if they come out by or before late '09 as I predict, they could quickly have an impressive line up of games aimed at this new sector of the market in short time.
Will they 'challenge' the Wii? I said 'Phfft! NO!' then, and I repeat it now. Phfft! NO! Nintendo will have too much of a headstart, too much excellent exclusive 1st party software and too big a brand to ever be challenged for #1, but that doesn't mean people who can't find one won't settle for the next best thing. Doesn't mean they couldn't give Sony and MS a real shot for their money for #2 or #3, despite coming in late to the game. (Now I'm going to get flamed...). Doesn't mean they won't be a real challenger, if not being a 'threat'.
Good discussion John.
