It's not a nightmare for Nintendo. Those who might pirate, assuming we even get to running back ups soon, will pirate anyways. They're not consumers for Nintendo. I don't think this will become mainstream because of course you still have to do some shoddy tomfoolery with the pins, it's not like a bannerbomb for Wii (not yet anyway) and a lot of future games from Nintendo will most likely require internet to get the most out of them. You're not pirating Splatoon 2 and playing online anytime soon, same goes for Smash, etc.
I think this will be best for homebrew apps like emulators, and backing up saves. The same things that have been happening since the GBA. Switch will continue to be a success and software sales will perform well as usual. I'm sure I don't speak for the majority of Switch's marketshare/userbase but I don't see even 1 million switch owners using this particular method in the future. Once it becomes, put your SD card in with a file and go to the web browser or something similar to that, this won't be a huge issue. But I guess it's inevitable for 16-18 Million devices. Nintendo best just get the revisions out ASAP.