We haven't had a great Zelda game for 13 years and from the most recent trailers, Skyward Sword is not an exception. Your description of Link in a dungeon reminded me of the lava dungeon in Twilight Princess, which was really impressive visually, but I can't remember anything I actually did in it. Let's worry about Link's sweat drops when the game actually becomes an action RPG again.

NES was based on ANCIENT technology. GB was two shades of green while other handhelds were color when it launched, let alone 8 or 9 years later. And DS and Wii did not compete over processing power, either. Remember Gunpei Yokoi. "Lateral thinking with withered technology." That's the basis of great game hardware design.

 Everyone uses those terms nowadays so I use them so people will understand what I am talking about. There are different demographics in gaming.

And also, your whole point was that all Nintendo needed to do was release an HD Wii . That won't fly.

They need a console with significant increases in power and better online service. If Nintendo takes its core audience for granted its beause some will buy anything they just slap together like that HD Wii you are asking for. That would just be lazy.

Nintendo has the capability to have their cake and eat it too. When you have the market for games that are both simple in premise and content-rich in design practically cornered, you have to move outward

Now, i could see that you would say focusing on putting good graphics in the next console would pose a distraction to the core values, but i disagree. Third parties are desperate and not making money, and it would be easy for them to match PS360 in terms of graphics capabilities, and the third party multiplats (which is basically everything worth getting from 3rd parties these days) will go there.

A modular, multipurpose controller would be the next step in making their experience more convenient, and then they can switch their focus back to content.

I am quite irked by this reactionary idea that Zelda has been ruined. The cyclical nature of Zelda sales and relevance has been documented here before, and Spirit Tracks is no metric of anything

I'm talking about the home consoles.

No, the point is that Nintendo needs a renewed focus on the games instead of on constantly "innovating" with no substance behind it.

If you follow the course of the DS touchscreen, to the Wii remote, to the balance board, to Motion , to the DSi cameras, and finally to the phantom Vitality Sensor, each and every control innovation Nintendo has had since Iwata took over has diminished in the amount of great content developed in support of it. And then with 3DS, there is no control innovation, there is just a graphics upgrade which Nintendo expects to carry weight just like MS and Sony thought HD would matter to customers.

Innovation is not an ends to itself. The ends is great, content-rich, multiplayer games, which is what gaming on your TV is all about. Expecting innovation with no substance to carry the day is lazy. Nintendo needs to back off on the innovation and amp up the substance to correct their current course.

I listed in the first post the technology-related things which in practical terms, are more important than sheer power. Reduced loading times. Reduced controller response lag. Maintaining 60 FPS. Keeping the system small, quiet and efficient. Recognizing higher amounts of controllers such as multiple balance boards.

Better online is almost presumed. More games should have Mario Kart style online, and friend codes should be less of a hassle. But Xbox shouldn't be the model. And a higher focus should be put on 4-controller penetration than online penetration. Local multiplayer is the domain of consoles.

If you want a "next big thing," maybe it should be 6 player gaming. Imagine 6 player Mario Party. Super Mario Bros.  Smash Bros. Mario Kart. Just Dance. 3 vs. 3 Tanks battles or Star Fox dogfights. If 4 player Mario Kart was fun on 17 inch CRTs, 6 players should be possible now that everyone is buying 42 inchers.

Nintendo would definitely need to put 2 controllers in the box and have additional 2 controller bundles available if they took that route. And then they could call the system something with "6" in the name to reference 6th console/6 players.

6 player local multiplayer gaming sounds fun.  However, that would be pretty damn expensive.  Nintendo is king of controller add-ons so to have 6 controllers with their add ons would cost probably around 250-400 at least.  I barely have 4 Wiimotes (mainly due to getting Wiimotes from bundled games, Wii Play, Wii Party, etc).  I have 4 Wiimotes, 3 nunchucks, 2 classic controllers, and 2 WM .  At least they finally put WM into the controllers.  I don't have enough money to have all the add-ons for 4 controllers.  I understand the importance of local multiplayer gaming.  However, since I graduated college a few years back and moved, I rarely have 3 friends over at my apt at one time.  I am more interested in online than local at this point.  I would rather have it the other way but due to schedule conflicts with friends, etc local multiplayer just doesn't happen that often for me anymore.

One thing Nintendo needs to due about their online is to just have a system code.  Get rid of the annoying FC and just have one system code.  Have it like PSN/Live also where you can see when your friends are online and what games they are playing.  This would be very helpful for online experience (also would basically cost nothing to implement these features). 

Nintendo certainly thinks they can have their cake and eat it too.

Third parties will never bring everything to a Nintendo console until Nintendo has 60% of the market. Then they will do it of necesity. Wii had tons of hits up through the Kart/Brawl/Fit triumvirate in mid-2008, and basically is riding on WSR, NSMBW and continued interest in Wii Fit and Mario Kart since then. If Nintendo had better content-focused games for the 3rd and 4th years, 3rd parties might not be an issue right now as Wii could have a majority of the market. Third parties not making money is not Nintendo's concern.

I'm talking about Twilight Princess. TP sold pretty well, but the actual reaction to it was a fraction of what Ocarina had. Ocarina sold all those copies launching on a dying console, pretty much without Europe. TP launched on an explosively popular console. You could argue TP was held back by being a Wii launch game, but that did nothing to hurt games like Mario 64. The Wii market in 2007 was so red hot that Mario Party and Mario and Sonic were doing Ocarina numbers while TP quickly became irrelevant despite a lack of competition in the genre.

If a Zelda with the customer reaction of Ocarina hit Wii in 2006-2008, it might have sold 12 million or more over it's life.

Yeah, controllers need to come complete. No doo-dads. And they would need to sell the system with 2 in the box, plus other 2 controller game bundles. That would make getting 4 or 6 controllers somewhat less expensive but WAY less annoying.

One other thing is that games that are more of compilations like Wii Play should come with a download code so that you can download the game to your system, and access all the games off the Wii menu without putting the disc in. That would really extend the life of games that people might only want to play for 5 or 10 minute bursts. Plus, then people could give the download code to a friend instead of putting it on their own system, which would really get people talking about the game.

Well if they did lower the cost of controller to at least last generation or possibly lower levels then that would be pretty damn good for everyone.  Price of controllers has risen too fast in my opinion.  They used to be in the 20 dollar range, then they went to 30 dollar range, etc...  Controller prices need to be curbed to ensure people take advantage of local multiplayer gaming. 

Do you think they can release a cheap controller that also has a rechargeable battery via USB?  They could go the regular battery route again and make the user either buy rechargeable pack or batteries to lower the cost.  However, I think they should have a rechargeable battery for their next controllers (I use rechargeable batteries but not all Wii users do).

I just skimmed through most of your OP.  I will read more in depth later tonight.  I just had to comment on the graphics.  Nintendo will definitely make it better graphics.  They realize that graphics aren't everything (every video game console producer should realize this considering the most powerful system hasn't been the highest selling console for that generation since the 16-bit era even then you had the Neo Geo during that generation, actually I don't even think the most powerful system has ever won a generation in home or handheld consoles).  I am sure they can achieve PS3 level graphics without adding a premium to the final price.  They should at least focus on getting it to or past PS3 graphics.  Then 3rd party companies can port their older games onto the system with minor updates.  Granted previous generation ports shouldn't be what Nintendo should be focusing on getting from 3rd party companies for their new system.  However, the 3rd party company can make a decent profit due to not having to put too much effort into porting it thus maybe having them want to develop some original titles for the system in the future.  Nintendo has shown that they don't really need that much 3rd party support, yet it couldn't hurt to have more good 3rd party support.