Straight from Wiki:
Output for Wii
480p (PAL/NTSC), 480i (NTSC) or 576i (PAL/SECAM), standard 4:3 and 16:9 anamorphic widescreen[63]

I may need to put on my reading glasses, but I don't see 720p anywhere in there.... Wai- oh never mind that's not it.

The Wii can output 854x576 which is VERY close to the resolution Halo 3 uses for example.

Thats interlaced though, Halo 3 is progressive.

Just as a point, if Nintendo followed their strategy from this generation in the next generation (in terms of processing power) the result would be a system which was 2 to 4 times as powerful as the XBox 360 or PS3; if they were trying to produce the most powerful system they could produce and for $300 it would be 4 to 8 times as powerful as these systems; and if they were really trying to push the limit the system would be 8 to 16 times as powerful as the XBox 360 or PS3.

Moore's Law hasn't stopped being true, and people don't expect it to stop being true until (sometime) after 2020. The next generation system will be based on a 32nm or 22nm manufacturing process which means they will be able to produce a processor with 8 to 16 times as many transistors on the same sized die, and they will be able to run this processor at a higher clock speed. This means that a Quad Core Cell processor (with each core having 8 working SPEs) running at 8GHz would probably be a very thrifty, low performance, CPU in late 2011 or 2012 (when Nintendo releases their next console).

Posted this in sony forums.

This is WiiII

http://media.gear.ign.com/articles/855/855511/vid_2303903.html

 Sometime tomorrow I will go rooting around for the old press release but it is likely going to be hard to find. The Wii technically can't output 480p so in a sense you are right. However, ATI has come out and said the video card itself is capable of producing images at 720p. Nintendo has locked it out for whatever reasons and has never even commented on it to my knowledge. If it isn't up tomorrow feel free to message me and remind me. It is a 2 year old news article at this point and will take some digging.

 As a half form of evidence it is worth mentioning that at worst the Wii has been said to be stronger than the original Xbox. The original Xbox had 720p games, and that implies that Wii can do it as well. This is just some food for thought to tide you over while I search.

Edit: http://gizmodo.com/gadgets/gadgets/wii-does-hd-but-not-really-237677.php Not the exact link I am looking for but it is relevant. Soon the article I want will reveal itsef I hope.

 Happy Squirrel highlighted a point that many many people seem to miss or misunderstand. Nintendo didn't make Wii relatively weak due to lack of money or lack of access to appropriate technology, it was a decision based on predicted profitability.