I have always assumed Nintendo would continue to follow the five year console life span, and had always intended to from day one, which is why Wii isn't in HD.
On the flipside I don't think Nintendo has ever been first to market home console wise, but I don't see any value to them waiting and lots to breaking new ground and stealing attention away from the 'same old things of PS360'.
As for having to compete with the installed bases of PS360 - I don't expect the next console to be Wii HD. I don't expect it to be easily portable for HD games even. I expect it to be so revolutionary, that it'll be it's own thing and will be the next hot thing like DS/Wii/3DS. 3rd parties will go whatever there's money to be made, including Wii 2 whatever it is.
