The problem with that is 3rd parties are very unstable on Nintendo consoles. If power was the only issue for them, the WiiU would have received more ports and games that came for the PS360. They could have done more old ports (Red Dead Redemption, Final Fantasy XIII, Tomb Raider, Resident Evil, Street Fighter 4 Ultra, Battlefield 4, the whole ME trilogy, The Walking Dead, Skyrim, Fallout 3...) and brought crossgenerational games, like GTA5 and Destiny. Instead, the support was very limited, with EA downright boycotting Nintendo because of Origin. Imagine the next generation, Nintendo deals with 3rd parties and designs its console with their ideas in mind, and months after the release they decide that it's not worth develope multiplats for the thing, and jump the ship once again. Most of the main eastern companies (Sega, Capcom, Namco-Bandai, Level 5...) keep supporting both home console and handheld, but the ones that move the most units (Ubisoft, EA, Activision) don't want to expand its developing costs.

Nintendo should expand, so it becomes able to substain both home console and handheld with no problems. Open more western and eastern studios, create more new IPs and spinoffs, help new companies create unique and risquy games (Bayoneta 2 being the perfect example), support even more the indie ambit (maybe even helping some of them to get a phisical release in handhelds), advertise more the online features...

Nintendo desperately needs to jettison the PowerPC 750 architecture they've clung to since the Gamecube, it's one of the main reasons the Wii U was held back power-wise.

Which GPU architecture do you think they should go for next ?

I honestly don't know, I haven't been keeping up with the latest in the GPU field.

Something future proof and non-proprietary though. 

Both of those conditions seem awfully vague ...

Future proof ? Do you mean "least dated" ? Nothing in chip design is every truly future proof ...

Non proprietary ? Almost every state of the art GPUs that you see today have patented technology from a specific chip designer ... 

As in, about as up to date as Xbone/PS4 were when they released.

And not some weird custom design that's expensive to make.

Alright then, Volcanic Islands it is ... 

I'd doubt that Nintendo would blow a lot of money for AMD or Imagination Technologies to create a GPU specific to Nintendo's needs ... 

Of course there are emulators available to emulate x86: Bochs and qemu. Both are able to emulate x86 on arm.

I think the way Nintendo will do it is to physically include a Wii U cpu (which is tiny and would cost very little, and it could be used as a co-processor for offloading some calculations) and have the gpu emulate the current Wii u gpu. That way you maintain compatibility for little component cost.

Emulating the ppc on x86 is not impossible but would require far more speed than is available or is likely to be available in the next 5 years, and Nintendo aren't known for going state of the art. Particularly with the level of optimisation that Nintendo are known for, the emulation would need to be clock cycle identical, nearly impossible to do without massive amounts of processing power.

PPC on x86 can in fact be quite efficient as Apple showed us with Rosetta.