This is exactly why they need to EXPAND their genres so these kids that grow up don't leave the system for others that do have what they want.

Some kids will go to other consoles, some will stop gaming altogether, and some will stay loyal to Nintendo.  The beautiful thing though is that people are always fucking, so there are going to be more kids.  There will always be more non-gamers than gamers.

At this point, Nintendo has a system that's not catching on with much of anyone, while Sony has a system that is strongly resonating with hardcore gamers, and Microsoft has one that is doing well at least in the US.  Neither the XBox One or the PS4 has much in the way of family friendly content or anyting that goes outside the bounds of "hardcore" gaming which is an area Nintendo has always been strong with.

Where then does Nintendo's opportunity lie? If the Wii U is going to be a success, it's not going to be because Nintendo out FPSed two consoles that will be flooded with FPS in two years.  That would require massive resource development, and a complete shift in marketing.  Having Miyamoto, who has consistently shown an ability to connect with casual gamers, work on an FPS would be like hiring Infinity Ward to work on your new dating sim. If the Wii U is going to be a success, they need to reengage the casual market.

Ideally, third party content would fill the gap that Nintendo leaves, but clearly that's not happening. 

The problem is people who can afford gaming are having less and less kids each generation as cost of living goes up (ie. wanting the dream of owning your own house etc,,,).

Errrrr... that's a pretty bold claim... I would need so see something backing them up.

Poor people are the ones populating the planet at an alarming rate.

Poverty is generally in decline worldwide.  In the US poverty spiced during the recession, but has generally been stable.  And poor kids play games.  I work in a school with a poverty rate of about 97%... Those kids love games.

Those are small fries who can't afford to buy games. Also who is to say that gaming won't die out with newer generation of kids?

 Gaming will die out with a newer generation of kids if companies like Nintendo don't focus on building up that market.

  We are hooked on gaming and they need to retain what they have has a risk mitigation if that were to ever happen.

There is nothing wrong with trying to retain your current gamers and capture new kids.

That's not what people are suggesting though.  People are suggesting that Nintendo go after the "hardcore" audience which is an audience they've never had success for.  In a world of unlimited resources, they could do this, but that's not reality. A few awesome FPS or hardcore games aren't going to be enough and the resources could be better spent attacking an area where Sony and MS are weaker.  

Why do you think Nintendo has been on a decline each gen (apart from Wii and it's blue ocean strategy)? It is because it can't retain its aging gamers. 

But the Wii was the success, so that's what they should be going for.  At any rate without third party support they CAN'T attack Sony and Microsoft on the "hardcore" front, so they'll need to focus on the audience that the others aren't reaching.

It will be called "Water Temple HD"

...........Genius idea! Gamers are going to love it!

OoT Water Temple is one of the best dungeons in Zelda history.

Complains about it are a surprise.