That's a fair question. 

My feeling is they should've split their console audience into two pillars. The "Wii" brand should've stayed focused on the casual gamer who wants motion gaming and plays once in a while. A "Wii" system where the Wiimote is not even the standard controller was probably always a bad idea. So two systems:

Wii Plus: $149.99 price point, Fall 2010 Release alongside DKCR

Basically like a Wii version of what the DSi was to the DS. More RAM, new OS, a better eShop to get more digital downloads. WM+ controller. HDMI output. Ability to upscale older Wii games for HDTVs and beef up that frame buffer to perhaps even allow newer Wii titles like DKCR and Skyward Sword to run in 720p. 

New Nintendo Entertainment System: $399.99 price point, Fall 2012 release

Tablet controller aimed more at the core player who likes to sit on their couch and play. "Entertainment system" actually means something with Nintendo TVii functionlity, Netflix, Hulu, Youtube, etc.. 1.2 TFLOP-ish GPU (blow that 360 outta the water), 4GB cheap DDR3 RAM, nice fat 64MB pool of eDRAM, quad-core CPU. Easy PC-like architecture for third parties to be able to get PC engines (not crap PS3/360 engines) up and running fast. 

Maybe they wouldn't beat Microsoft in the long term, but I think Sony would be in tough trying to beat MS and catch Nintendo too. I think a "New NES" could've effectively been like a PS2 with a year head start.  

I think the truth is, you can't make one system that pleases everyone. Video games are not a "one size fits all sweater" business anymore, people have distinct tastes nowadays. 

Maybe it's what I do and how I made my money. Sustained price weakness is a great way to accumulate wealth. I would at least continue buying for another year or two. If you are still trying to make it, this is even better as it literally waits forever until it launches again, allowing you to beef up your holdings over time at your leisure. Especially if you find it enjoyable following an industry and a stock this closely. As long as the company did not veer itself into eminent danger (excessive leverage kills just about all businesses), bite a big chunk out of this baby!!!

The average person benefits little from stock trading, the returns are abysmal over time, and that's blended up by professional results! Instant pricing availability, split second trading availability, makes the stock market an easy place to move your money through it, but ever more diffcult to keep it growing in it. So instead of listening to the BS about diversification, allocation, blah blah. Stick with a few that you truy understand, then pour any time you would have spent on your career or on having fun, and over time you'd have much more wealth and fun than the typical miserable stock market participant.

One thing I like for sure is the name "New NES."  I'm also warming to your idea of dividing up a casual console and a hardcore one, instead of trying to combine them together into one system.

Dividing casual and hardcore console would result in failure for Nintendo. Microsoft was hinting at splitting their console up with a less demanding casual console and a higher end model next gen. To be frank it would be fucking stupid if Nintendo did this.

"New NES" would be a great way to really evoke nostalgia among older consumers too which is exactly who such a device would be aimed at initially (kids and budget shoppers could stick with the Wii Plus for a while). 

They could call it New Nintendo Family Computer (Famicom) in Japan. 

A lot of folks are scared by the stock-market, that the game's rigged.  I still think it's the best way to make wealth.  But I have to endorse basic principles of diversification and not putting your eggs in one basket.  

Nintendo is a great buy right now, hands down.  With so much of their book-value & tangible book-value made up of Cash & Short-Term Investments, the downside risk right now is pretty much zero.  It's crazy.

Car makers do it all the time.  PC makers too. Smartphones and tablets too.  Imagine if MSFT bought out Nintendo?  Xbox = Porsche, Nintendo = Audi, or if you must go Japanese, Lexus/Toyota/Scion.  Nintendo would benefit the most embracing apps market, how can they forget their own humble beginnings?  

Isn't Nintendo a big enough company to handle two consoles at once?  Isn't there room in the industry for another major console?  Aren't those clearly two different gaming markets - the casual & hardcore gamers?

I don't really see why it's such a bad idea.  I'm not saying it's good...just that it's not obviously bad, and for all I know it could be the right move.

Why not?

Just ask Sega how splitting their user base ended up for them.  Remember the Sega CD and 32X?  That effectively split their user base.  Sure perhaps my thinking is outdated but I see no benefit in splitting the user base from core and casual.  The great thing about Nintendo is that their games can appeal to both. 

I think refreshing the existing Wii would've been a really good idea around 2010 and could've extended the Wii's life cycle, keeping it cheap.

A $99.99 Wii Plus that could run on HDTVs and maybe could even run a basic version of Miiverse with a nice new eShop would clean up.

Nintendo wouldn't have to support it so much, they could put hundreds of back catalog games and VC titles up on the eShop for download. And encourage low budget app downloads. Casuals are not like hardcore players, they don't need some big new game announcement every 3 months. 

It would be a great buy for people who just want a nice party/casual machine around the house and don't need the highest end graphics.

It probably also would keep the Wii selling longer so that there'd be no chance of the PS3 catching it, which is unlikely but not necessarily impossible.

"Wii" is synonmous with casual gaming and the Wiimote itself. Keep it focused on that, trying to create some kind of bizarre Wii successor that's "sort of" for casuals, and "sort of" for hardcore players I think basically has yielded Nintendo a system that isn't all that appealling to either audience. 

Wii U is too expensive and the controller is in a lot of ways the antithesis of the Wiimote (big, bulky, tons of buttons, takes gaming back to sitting on the couch) for casuals. 

It's not different enough from the 360/PS3 to please the hardcore who want something legitimately a large step beyond after 6-7 years of the PS3/360 generation.