I don't think the problem with Wii U is the graphics (although it will make it a harder sell to 'core' gamers) I think it's the fact that the touchscreen on what is otherwise a return to a traditional controller is no where near innovative enough to win over people and compared to Wii, Kinect and Move seems like a step backwards.
However, it'll be the software not that hardware that ultimately wins the day. Wii would not have been the hit it was without Wii Sports and Wii Fit. However, so far we've seen nothing of the (potential sales) calibur of Wii Sports or Wii Fit for Wii U. Nintendo better have something genius in the software department or it'll lose to Xbox Durango with it's much refined Kinect gameplay (assuming MS comes up with innovative gameplay to sell it).
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