PS4 level visuals won't be possibly in an affordable sub $200 handheld for a long time so that breaks the whole point of the "fusion" system if the handheld simply can't run games or they need to be scaled down so far that you might as well just build the handheld version from scratch.
The handheld and console have to be comparable in horsepower, my guess is if this is indeed the direction Nintendo goes, the only main difference between playing a game on the handheld vs. the console will be the resolution (just like iPhone/iPad apps). You play Mario Galaxy 3 on your TV, finish one level, then you can go on the bus and continue playing the exact same game from that point later in the day, same game, same visual fidelity more or less on your handheld.
The console business is a sh*tty business anyway ... no one's making any money off it and Nintendo's never going to pry dudebros away from Sony/MS which leaves them with a very limited potential audience since casuals aren't a dead end for them too (can't compete with free/$1 games on a device that everyone carries around with them all the time).
Also being able to share CPU/GPU cores and using the same memory in the handheld/console variants will save Nintendo a ton of R&D and allow them to buy those components at cheaper prices since they'll be ordering them in higher volumes. It's also an extremely attractive business model from the POV of say the console isn't selling so great, but the handheld is (or vice versa) ... you can just take the CPU/GPU/RAM cores and repurpose them into the better selling hardware variant.
Whereas right now take the Wii U and 3DS ... completely different components, and the Wii U is selling like a dog ... Nintendo has to eat the short term loss on Wii U inventory. They can't like take the Wii U chip and use it in the 3DS, because they are completely different.
