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joora said:
Wasn't there a story about how Iwata took 3 DVD cases, stacked em together and said to engineers that he wanted a console that doesn't exceed that size?

It's not just a story, it's true. Here it is from the horse's mouth:

Iwata: Wii certainly stands out in comparison with the other game consoles that are available.
Firstly, it's by far the smallest. Tell us a bit about this.

Takamoto: Well, as you said, one of the most striking aspects of Wii is its small size. Our specific target
in developing this console was to make it no larger than 2 or 3 stacked DVD cases. Of course, this was a
direct order from you! (laughs)

Iwata:I actually stacked up a few DVD cases and said, "I'd like to make it about this size!" (laughs)
I guess this must have come as a shock to you?

 Takamoto:"Well, I was more stumped than shocked


http://www.nintendo.com/wii/what/iwataasks/volume-1/part-2 
There is also a fascinating story about choosing the size  of Wii Fithttp://us.wii.com/wii-fit/iwata_asks/vol1_page3.jsp