Here's what I see. Nintendo's next console will obviously be at least as powerful as the HD twins cuz that tech is 5-6 years old now. i don't believe the controllers with the hd screens at all cuz that would make each controller cost at least $100 bucks and use up way too much battery.
Nintendo is either gonna go with a $250 console w/ a game included that has power equal to ps360 with vastly upgraded motion controls and also support a standard controller too. it will improve its online content to a reasonable level and start off its life by getting new advanced motion control games as well as ps360 ports. this however i think is a poor option cuz it would basically be an advanced motion control hd twin. and while cheap it would not stand up to the other two nextgen consoles when they would come out a year or two later, and nintendo would again miss out on the majority of multiplatform ports and 3rd party support.
i think we are getting to the point where graphics don't need to be anymore detailed than they are in the best ps3 games in terms of the # of polygons and the detail of the textures, however, there is still a lot of room for improvement in the dynamics of whats going on onscreen, such as physics stuff, special effects, "living-world" effects like believable vegetation, animation, AI, as well as more processing power to include more on screen not in detail but for example in war games you could include hundreds of soldiers on screen at once so entire battles could take place on screen, also just larger open environments.
But this is what i think is the most likely and most profitable thing to do:
So now that gamers are used to the high price point thanks to sony and microsoft, and with the nextgen nintendo system coming out a year or two before the other two, nintendo can bring out a new system noticeable more powerful than the HDtwins, say 10 times more powerful, and the games could have much more lush dynamic environments. all games would be 1080p. they could still get ports from ps360 games while having their own supply of more advanced games. this would shift more 3rd party support to nintendo than they are used to. and as said above they would have advanced motion controls, i see some combination of the kinect style camera recognition motion controls combined with advanced controller-based motion controls. ideally they will have figured out a way to make the two separate left and righthand motion controllers in a way so that you can connect them together and use them as a standard controller for the games that would work better with a standard controller and that way not also have to make people purchase standard controllers (i think this will be a big issue for next gen consoles cuz people are not gonna wanna spend $50 for each of two different kinds of controllers), although i have no idea how possible this is. as above they will finally get a good online setup. If they garner good 3rd party support and release big 1st party titles in the first 2 years before the other two nextgen consoles come out they will have a significant advantage. I'd see this Wii2 coming out at $350 and when the ps4 and xboxNext come out they could drop down to $300 while those two systems will probably release at $400 and they will continue to have an advantage.
end of '08 predictions: wii - 43 million, 360 - 25 million, ps3 - 20 million
Games I've beat recently: Super Mario Galaxy, Knights of the Old Republic, Shadow of the Collossus
Proud owner of wii, gamecube, xbox, ps2, dreamcast, n64, snes, genesis, 3DO, nes, atari, intellivision, unisonic tournament 2000, and gameboy