Quite honestly, I don't see this being a good thing for Nintendo? I doubt they would ever do it. Competition in a marketplace is healthy for companies, if there was only one console then I think the market would drop in size rather than grow.
Competition in marketplace is more healthy for consumers... but I digress. IMO, PC gaming is more than capable of offsetting anything consoles can offer. Microsoft will be pushing towards PC/console gaming... besides, it's gonna be at least 2009. We might already have another breakthrough console by then.
Nintendo still needs hardware... for instance, just as an example, the future is all about wireless. Sony has the expertise, Nintendo doesn't. There's Sony-Ericsson phones, why not Nintendo-Sony DS phones? Entertainment doesn't have to be in the form of games--Wii Health might be the first example of such. I'd be shocked if somebody of Miyamoto's caliber doesn't have something in mind for cell phones.
Cell phone is just one example. How about miniature ID circuits that are already experimental in certain bars? (injection under your skin) Global/local positioning? If Nintendo can come up with the Wii, there's a ton of other stuff they can come up with.
I have tremendous faith in Nintendo's ability to turn technology into things that "put smiles on people's faces". That's why I hope it's not technology that holds Nintendo back, thus the rational for a Sony-Nintendo joint venture.
the Wii is an epidemic.