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I see people are still comparing clock speeds of different architecture chips... It doesn't work.

Remember as well it wasn't just a cost issue, the small form factor of the Wii and low power consumption make it an easy addition to even the most modest room.  The small white inconspicuous box is easier to get past wives and girlfriends than some hulking black or grey beast!!  Making it some uber-spec machine would mean a larger form factor with more cooling and power drain.

 I think it's a genius pitch, it's the one home console that sells at a profit too.