Mario, Halo, Zelda, Forza, Mario Kart, Killer Instinct, Banjo-Kazooie, Kirby, Perfect Dark, Smash Bros, Pokemon, Gears of War, Donkey Kong, etc. all on one platform + all Western third party content on board ... would be a formidable combination, lets not kid ourselves. Just internally ... Nintendo would be able to cover almost all major genres themselves.
Rare could be repositioned to take over some Nintendo IP that Nintendo no longer wants to work on like say ... Wave Race (the waves in Kinect Sports jet skiing sure are purdy ...) too. If Nintendo could "rehab" Rare into a solid studio (they took an average developer in Next Level Games and turned them into a nice studio) this would be hands down the most powerful 1st/2nd party combination in the business by quite a gap IMO.