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Soundwave said:

Even at $250 the Wii could have been a lot more powerful than what it was. Again $200 was what the GameCube launched at just 5 years earlier and that was a monstrous upgrade over the N64. 

Nintendo didn't want to risk it. I also think the Wii was probably supposed to cost $199.99 ... they only went to $250 once they started to get positive word of mouth from initial showings of the system and Sony dropped the bomb of $599.99 for PS3. With PS3 being $600, I think Nintendo realized they could get away with $249.99. 

But Nintendo themselves has said now in hindsight not making the Wii more powerful to support things like HD resolution was a mistake (well Miyamoto has said it). 

I think some people here are forgetting how new the execution of motion controls was at the time, it would have surely been the main factor pushing the price up, as for HD that's just a plain no don't care what Miyamoto said as lets go by what happened with the WiiU where Nintendo said they underestimated just how demanding development in HD was which lead to the platform's trouble output. Had the Wii had HD they would have experienced those problems with that platform instead which with the position they were coming off with the GC would be disastrous so they were right not going for HD with it