No, I do not ruin my consoles shelf-life doing things on them besides playing games, but that's just me.

Eh... no, I wouldn't buy it.

Also, the hypothetical dongle would be unnecessary, seeing that Nintendo could (possibly) unlock 720p with a simple firmware upgrade.

Um, yeah. And since all the hardware which is the source of the image remains the same, the image quality remains the same. The shaders are the same, the geometry is the same, the texture detail is the same. All I've gained are pixels. I'm the kind of guy who doesn't mind playing PC shooters at 640x480. Doubling the resolution doesn't do anything for me.

And why would I put extra wear on my $250 console (plus another $50 for CD/DVD playback) when I could place that wear on a $50 DVD player? Or a $30 drive in a media center PC with far more functionality than my Wii could ever have?

I'd won't pay more than £25 for one of these peripherals!

In addition, one shouldn't pay a premium over half of the console's standard price for improved graphics!

 I was under the impression that the wii's inability to output above 480p was in part because of its connection. Meaning while it may in theory be able to render in 720p it is still unable to output it. By the way even if Nintendo managed to get the wii to output 720p how many frames per second could it run at??

1.- Component can carry 720p.

2.- Seeing that games with very complex graphics like Mario Galaxy run at 60fps without slowdowns, I see games with that level of graphics running at least at 30fps in 720p.

 from what i've read the electronics responsible for outputing the video signal can only output 480p max, this was the same case with the gamecube. So just because the wii can use component cables does not mean it can actually output 720p, it just means it can output 480p for a cleaner image rather than in 480i on composite cables.

The "electronics responsible"? You mean the graphics processing unit right? In the Cube, 480p was absolute maximum because GPU could not draw frames into main memory (24MB). Also, if it ever could, it was too little and it left no room for the program itself. In the case of the Wii, the GPU can draw frames into both Memory 1 (24MB 1T) and Memory 2 (64MB GDDR3) if the framebuffer is not enough.

What's the point in upscaling it to 1080p? It'd still look horrible. And that'd push the console into the $400 range.

 nope not the GPU persay but the electronic that actually output the analogue signal out through AV cables, this component of the wii is the same as the gamecube and it max's out at only 480p which is why the wii can not output anything higher than 480p.

Also, the wii GPU renders to it's 2MB dedicated frame buffer (plus 1MB texture cache), and although it can also render to it's vram it will have a a significant performance hit, which is why developers just stick to rendering to it's dedicated frame buffer see as their is no benifit doing it the other way.