Nintendo wouldn't leave hardware. You are correct in saying there is a ton of cash in it.
That doesn't mean that you have to produce the same device for the next few centuries, though.
If Sony is going the route of a PSPhone hybrid, then there is no reason that Nintendo could not do the same.
I'd imagine that they could do a better version of the DS (which is an awful lot like an enV Touch) with a Nintendo Marketplace running Android, and a nicer look, and would do very well. Apple makes far more cash for every iPhone than what Nintendo does per DS, and makes a decent bit of royalties off of iTunes, so it would be an easy assumption that Nintendo could manage to do something similar....That is if they had the cojones to do it.
Back from the dead, I'm afraid.
