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To be honest Nintendo did everything right with the Wii(though some luck was involved to), what they did wrong is that's all they did. They was serious demand for a Wii HD pretty quickly and it would have cattered to the core gaming audience and have kept Nintendo's loyal following happy. Introducing a more powerfull Wii HD alongside the Wii could only have increased sales, and it might have drawn in 3rd party's and with that possibly quite a few people that were looking for a system to play multi-platform games.

It could have brought Nintendo back in the game but instead they stayed with the casuals, while they could have catered to both.