According to the fusion specs it will be very weak and the display resolution will be even below the resolution of 5 year old smartphones.

Powerful enough for it to do whatever it needs to do. Hopefully powerful enough that they won't need to make a more powerful model with exclusive games not even halfway through it's life.

Phones and tablets are getting progressively better at gaming, reducing the perceived need for a dedicated device to serve this purpose. Dedicated anything is becoming an obsolete concept sadly, everything is moving towards multipurpose media devices. It will be very hard to convince a consumer in 2017 who's not a hardcore Nntendo fan to buy a device that only plays portable games.

It's a Nintendo handheld. It will be disappointingly underpowered (hence development will be cheaper), but it will be profitable day 1. It's Nintendo, these are their priorities, not our graphical pleasures. It won't be a big step forward comparing to Vita. Unless Sony totally kills the poor thing, I could see Japanese devs making their games multiplat between the two.

my idea has prob been thrown around a lot but here it is anyway.

The next console will be like the wii u but the tablet will be the 3ds's successor.

laptops didnt kill desktops and tablets havent killed laptops just like streaming services like netflix/hulu havent killed cable and mp3 disnt kill cds. 

yes gaming on phones has certainly hurt handhelds like all of those things listed have hurt the others but there is still a market for all of those things like there still is a market for dedicated handhelds as long as they are priced correctly ($199 or under) and have a bunch of big multimillion selling franchises (Pokemon/Mario/Smash/Monster Hunter/etc).

of course Nintendo needs to adapt to the market and make some changes going forward. for example continue to build relations with indies and try making the eshop into a strong competitor to apple and googles play stores. make the virtual console a big deal again and creating a subscription service like $50/year gets u unlimited access to the entire virtual console. also consider lower prices for software, if a game has a relatively low budget and isnt a multimillion selling franchise, dont price it at $40, this type of game could sell for $19.99, save the $40 price tag for the big hitters or big budget titles.

From what I hear, modern phones with built in HD cameras are suffocating the dedicated consumer camera market in a similar fashion. Multipurpose devices are replacing dedicated ones across the electronics industry. People buy one thing that does A, B, and C, instead of three separate devices that each do one. The age of (consumer) devices that do one thing seems to be coming to a close.

Price is part of it, yes; people are getting less and less willing to part with $40 after being conditioned to believe a mobile game should be 99c. And this is only going to get worse and the next generation grows up with the expectation of everything being dirt cheap, having never experienced the days  of $40 handheld games being the norm.

As for the Virtual Console, I'd probably be banned if I said how I really felt about Nintendo's handling of it. Suffice it to say, the dripfeed pace of releases and anemic library it offers is absolutely criminal and it's unbelievable that they are managing such a lucrative resource so poorly.

Your recipe for success sound a whole lot like Vita.

Slightly more powerful than Vita

how so? Vita didnt launch at $199 and doesnt have a bunch of multimillion selling franchises