I think in hindsight, Nintendo should've moderately upgraded the Wii (Wii HD as it were) in fall 2010 (with DKCR) and kept the Wii brand separate for casual players. Better OS and eShop, more internal storage (Wii was really lacking here), same Wiimote+, slightly beefier chipset that could run newer games at 720p and Netflix in 1080p.
Then launched a new console under a new brand (New NES?) in fall 2012 aimed at more of a core gamer at first. And Wii HD could've sold for a few more years too at $99.99 ... the Wii fizzling so hard in 2011/12 really was bad.
Wii HD - $169.99 launch MSRP (Fall 2010) eventually drop to $99.99 (by fall 2012). Can run games like Wii Sports 3, Wii Fit 3, DKCR, and Zelda: Skyward Sword in 720p (same graphics otherwise), better eShop, more internal storage, better OS. HDMI output, Netflix/Hulu run in 1080p.
New NES - $349.99 MSRP (Fall 2012), 1TFLOP next-gen console, no tablet controller. Work with some Western 2nd party studios to make 1 or 2 really Western centric IP for launch window, PC architecture, easy for third parties to get a grip on, lots of RAM. Have Metroid and Wave Race games in the launch (spend some of that freaking Wii/DS money) window along with Mario. Drop to $299.99 by fall 2013, aim for a 8-10 million unit headstart.
I think Nintendo would be sitting pretty right now if they had done this, they'd be selling both systems right now at good amounts IMO.
