Nintendo would still be losing money per console sold, and its box would sell even less at $500+. Or is Microsoft going to take that loss too?

It would save some HW dev costs, but that's not why Nintendo is losing so much money now.

Power will not grant proper third party support, and even if it happens there's no guarantee that people will buy a Nintendo system for third party games.

At the end of the day, not worth it.

Microsoft responds to anyone who they feel like they are a threat. Sony and Apple are two of those hence their investments in Gaming, the Windows 8 design and the Windows Phone. They are like a crazed predator.

The funniest is how they ditched MSN messenger and bought skype.

All the negatives both companies have in consumers eyes can all be rectified by themselves alone. It's not like Nintendo *has* to make garbage internet features. Or Micro *has* to force Kinect everywhere. These companies choose to do these things. For whatever reason. Why would they bother to team up? When that would just cause a split in revenue. They just need to fix what is considered broken, by themselves. Or not. Banking if their original plans will work with people. Or keep failing. Making the the teaming up option moot.

A kinect/pad bundled console came to my mind xD

Shows you what they think of their product. Same thing with Bing.