First off, please read the following before disregarding the above poll as impossible.  Nintendo's history does not necessarily indicate that they would go this route, but let's entertain this hypothetical for a moment.

The Wii is the first Nintendo system to be vastly underpowered compared to its competition, and there's a reason for that.  Their funds were obviously spent on the R&D of the Wii-mote, not the console's tech.

Microsoft and Sony have both built their current systems to last a bit longer than the typical console lifecycle.  They're both closely watching each other and each knows that the other is in no hurry to release a whole new system right now.  Each have invested a lot of money and tech into machines that are still impressing us, and let's face it, both companies want to sell more than they have, if possible.  Thing is, Nintendo is also well aware that they plan to stick it out a while longer...

Now let's consider the handheld market for a moment (different from the home console space, I know, but humor me).  Nintendo released the GameBoy in 1989 and although it went through several iterations, there was no full hardware jump until the GameBoy Advance twelve years later.  However in light of Sony threatening their portable domination, Nintendo unleashed their next generation hand-held, the DS, only three and a half years after the GBA; even though this meant a relatively short life for GBA even while its sales were good.  Point being that Nintendo launched first when they were already on top, to secure their lead.  Yes the Wii is doing just fine against the competition for now, but with the HD systems continuing to gain momentum and Wii already a success for Nintendo (they're best selling home console ever), might they be inclined to be the ones who, as with the DS, begin the next generation themselves?  Remember that Nintendo is releasing new versions or Mario, Metroid and quite possibly Zelda all this year.  That's a lot of trump cards being played real soon and all at once, don't you think?  And remember that no Nintendo console has lasted more than five years before a successor's release, save for the NES, which was six.

We all know that Nintendo won't realese a new system based on graphics alone; they will have some new hook that justifies a new console.  My question is, just how powerful will they go?  They could probably launch next year and just largely match the current HD systems capabilities and still sell the system for $249, since it still probably wouldn't have DVD playback, much less Blu-ray.  Or they could just make the current Wii HD capable, but personally I really hope they don't.

Just imagine if you will, if they launched in 2011 or early 2012, invested a bit in the tech of the system and unleased a console that's launch games looked head and shoulders better than the competition, much like Dreamcast looked better than PS1 and N64.  Sounds absurd... at first.  But when you consider that tech at this time would be even cheaper, they could still launch at around $299 and sell in droves.  Problem is Nintendo would likely take a hit on each system sold, and we all know the big N wouldn't like that.  However Xbox 360 proved that $399 isn't out of the question for then cutting-edge tech...   

My guess for what will probably happen is just matching the competition in 2011 or early 2012; as that's all they'll need to do to sell huge and not spend a lot. 

But here's one Nintendo fan that hopes they surprise us all and unleash a beast of a console- even without full 1080p or Blu-ray, with so much RAM, horsepower, and tweaked graphical architecture, it would far outshine even the PS3's best, even at launch.  Combined with Nintendo's new ideas, third parties would likely flock to it and consumers would be rabbid over it, and especially if it launched in 2011, Microsoft and Sony wouldn't know what hit them.  Yes, Nintendo would be starting from scratch, but 360 and PS3 are hardly dominant in sales even compared to Wii, much less what PS2 had accomplished.  Nintendo may likely lose a little if it sold for the right price, but it would be a small price to pay in light of solidifying a dominant position in the market.

With all those new features, blu-ray, 1080p graphcias ect it could cost a fortune. sometime in 2012 I think would be best or 2013.

I'm pretty sure Wii-2 will come out on 2011 with blu-ray, 1080p and all the nice names they like to throw at technology laymen. Look at PC performance for instance, any $100 ATI video card mind rapes PS3 and X360's ones and it is cheaper to produce. BR diodes are pretty cheap nowadays too.

But Nintendo is famous for surprising us. Who knows, they could bring on some innovation that scrambles with all these predictions and assumptions.

No, my hypothesis was without Blu-ray and 1080p, just with a lot of RAM, horsepower, etc.  It would likely be DVD (without playback) and probably only 720p capable. 

Ah, good points.

720p would be good enough for me, amongs other nice innovations.

none of the above.... I see these dates as too soon.

Nintendo won't be the first to make the move this gen... actually they never are the first to make the move regarding consoles...

Where is my option for no?

Demand is greater than Supply, so why change anything right now? You are making a healthy profit, selling more than you can provide (so no need at all for a price cut), have new hardware accessories coming out (VS), have a great line-up of games that you know will sell (first party), there just is not any need right now.

Should they being doing R&D right now? Yes, without a doubt. Be ready to use some of those massive profits to dominate for another Gen.

Since I have to pick one of the above, safe bet right now is just update it to HD (allow all games to be upscaledw + allow devs to make HD res games if they want). No need for Blue-ray (they are in the same boat as MS, why support a tech that does nothing else for you but raise costs?)

Nintendo could play it either way. The obviously don't need to be the ones that start the next generation, they are currently making heaps of money as is, but perhaps they will take the kick-them-while-they-are-down mentality.

However your assertion that the Wii is underpowered due to Nintendo running out of R+D funding is fallacious. It was an intentional design decision, not one forced on them by circumstance.

Agreed 100% on your first statements.  That's exactly the point I was making:  go in for the kill while they can.

However regarding the last statements, I never intended to insinuate that Nintendo couldn't have also gone more powerful if they had wanted to; they have billions in the bank, after all.  I was just pointing out that clearly power was not their focus or where they spent money.