They can't and they won't.

Anything they took out would botch the system.

Anything they changed about size and shape would cost in R&D, prototyping and reconfiguring of the manufacturing process, which isn't likely to make itself back from any small increase in sales.

It would also mean the Wii U would be nothing more anymore than a seriously underpowered PS4/Xbox ONE, and probably hurt the Consoles sales even more than lowering the price less but still having the Gamepad on the long run.

You dont have to be a rocket scientist to know that corporations dont do things because they are stubborn, they do things based on strategy. They want to sell you their own TV with their own propieatry tech. At some point in the future you will buy a Nintendo console with a rollable OLED, which you can play wirelessly anywhere in your house, thereby freeing Nintendo of the tech armsrace to be compatible with TVs made by other corporations.

Redesign the Gamepad to make it smaller. That's pretty much the only thing they can do to lower the price right now.

The gamepad doesn't cost much despite what people claim. Reducing the screen size will do next to nothing.

To be honest, it would make more sense to release a updated version with more flash and a slightly better gamepad with a better screen and battery life.

Get rid of the disc drive. Most (if not all) games appear in the eShop now. So they could make an online only SKU. However, I doubt that would make consumers happy ...

BC is integrated into the processor, and apparently not much of a stretch. Other than that, what? 512MB of flash storage? I don't think BC's much of a problem.

At this point they need to just lower the price on the current machine.

Lower screen size gamepad "Maybe" reduces cost.

^This. The price has never been the problem and never will be. Get a few more exclusive major titles.