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-3rd party support is out of the question, only Ubi seems to be porting their games... And more power will not change anything (look at GCN and N64)
-There is not as many hardcore Nintendo fans as PS hardcore fans, look at GCN and N64 again...
-More power means more resources and more time to develop games are needed = less potential to release a wide array of games (do you rather have F-Zero and Starfox, or just one of them but with slightly better graphic?)
-Better graphic in games doesn't mean more sales, it might help but in the end it probably won't balance out the cost of development. (KZ developers stating 4x the cost for PS4 development...)
-Nintendo has just started HD development, they need more time to master it, Wii U is the perfect platform to experiment that.
-Making a new console so soon will make fans lose confidence in the brand. This is not Apple we're talking about.
-The cheapest and weakest consoles tend to sale the best (Wii, PS1, PS2 etc)
-More power means more problems with Hardware (RROD, YLOD, PS4, XB1...) Wii U might be less powerful but it doesn't have hardware problems. Same for Wii. GCN was just a beast on its own...
-Exclusives dictate everything else.
-Nintendo doesn't care if the hardware doesn't sell, their games sells enough to turn a profit.
-Nintendo has other plans in the work. We don't know yet, but by merging their Handheld and Console departments, something big will come in the next 5 years.
-The time used to think about new gameplay ideas and new features for games will be cut down if they have to focus more on graphics to please a minority, and/or have to delay a game even more... (looking at you Pikmin)

3DS domination exists because of the games it has not because it's under-powered. Most people don't even care about the 3D gimmick.
People that care about power purchased a Vita, looks like power isn't what people want eh? Nintendo knows that.

If people don't care about the Wii U gamepad, but it has the games, like the 3DS, it will sell well.
Wii U hasn't sold well during its first year because of the lack of key franchises, a 2D mario on a console is not like a 3D Mario on a console. Pikmin is not well known, and thats it.