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The best thing a developer could do if they wanted to make a true HD Wii game in 720p-1080i would be to use static pre-rendered backgrounds. Reducing the real time graphics frees up a good deal of power. The PS2 could do 1080i and wasn't even as powerful as the Gamecube.
In theory with a fairly sparse background or a pre-rendered background the Wii could do 720p fairly easily. The system itself is about as strong as the Xbox which did offer 1080i and 720p I see absolutely no reason why, in fact judging from amount of shaders etc I'd venture the Wii would be more capable than the original Xbox which everyone raved about looking so good last gen.