If it were to happen (not saying it will), but if it were to happen it would probably happen like this:

1.) Smartphone games becomes a big, maybe even central part of Nintendo's profits on a yearly basis. Single smartphone hits can earn up to $1 million/day, it's not a reach that maybe 5-6 different Nintendo IP could rack in $300-$500+ million/year for Nintendo. That would show there's a large market of people who want Nintendo games outside of just Nintendo hardware owners.

2.) The NX doesn't do so great and their traditional hardware model continues to decline. Handhelds continue to have their market base eaten away, they're unable to come up with a miracle gimmick for their next console variant/iteration, etc. In that case unified platform will help them but it won't be a silver bullet that saves them.

In that scenario I think Nintendo would consider stepping down from dedicated hardware to push their IP to the widest possible user base.

I guess the crux of the situation is this: are people willing to carry around a seperate dedicated gaming handheld in today's day and age ... and the answer to that is increasingly becoming no, so that's a big problem. If they don't have a bedrock foundation with portables to lean on, their track record with consoles is way too spotty to bank the entire company on. Even in a Fusion setup, the handheld has to be the one that carries the load and drives adoption. 

That doesn't make any sense. Nintendo is a software company. Why would they make less games suddenly when that's their main stream of income?

Since their biggest IPs will get even bigger on multiplat, they should have enough funds to make as many games as they want. To say that Nintendo only makes games to sell hardware is a pretty cynical way to look at it.

What you're basically saying is that all of Nintendo's smaller games are losing them money.

They only make/publish niche games to sell hardware, was what I was saying. Why would Nintendo invest in Fatal Frame, Bayonetta etc  - when they can invest in vastly more profitable games? The answer is: to diversify their library, and sell hardware so that their big series can sell to more people as well. Games like Fatal Frame and Bayonetta will lose them money unless they have another purpose besides the revenue they make exceeding the costs to make them. They invest in these games because they know that there might be future benefits for doing so. This isn't excessively cynical at all. It's the reality of the matter. 

So what? These are Non-Nintendo IPs. If they don't pick them up somebody else will. I mean there are still 2 other platform holders desperate to sell their hardware. And if no one picks them up they're obviously not worth it. The absence of these niche IPs will not be noticeable. Or do you miss the thousands of other dormant niche IPs that Nintendo hasn't been picked up yet?

Nintendo owns the Fatal Frame IP now. And nobody was picking Bayonetta 2 up, it was left to die. But even then with their smaller IP's there will be opportunity costs involved, which tell them, for example, that making another Mario spinoff game will net them more profit than making a new IP like Splatoon or a fourth Pikmin game. Since they have to care much less about market saturation in this case (as long as the games play differently) you should expect a few uses of their smaller IP's and more uses of their best-selling IP's. Capcom does it. Activision does. EA does. Square-Enix does it. Sega does it. Ubisoft does it. Practically every big named publisher does this. We'd probably see Metroid, Star Fox, etc once every five - ten years or so (assuming sales remained at their current lows) meanwhile Mario and Pokemon would definitely get two (or more games per year.) 

That's the first time someone said that Nintendo is as greedy as Ubisoft and EA. I present you with the Medal of Equality for that statement ;)

But back to my first point; I don't really care. All I want are the main Nintendo IPs on a platform the games deserve. Only Mario on PS4 without the smaller stuff is still better than no Mario at all.

It is either delusional or an ignorance of basic microeconomics to believe that corporations are not profit-seeking firms. Of course Nintendo seeks to maximize profits. All companies do. 

As for your first point, that is only for you. I like having diverse IP's from Nintendo, as their ideas are fresh and creative. I like playing Nintendo's smaller IP's like Metroid and Xenoblade Chronicles. I like that Nintendo invested into Bayonetta 2, a highly aclaimed game by users and critics alike, and I look forward to playing it. Good for you =/= good for gamers, as you stated in the original post I quoted.

That is not entirely fair though. All of the 3 platform holders have very divers games. Nintendo isn't the owner of the holy grail of innovation. Not much would be missing if we didn't have the IPs Nintendo has invested in. Nothing noticeable at least. We still have all genres and innovation and tons of indies. Having just a few of these IPs less in a time where hundreds of new games are created every year is not nearly as big a deal as making the gaming industry more converged. Hence increasing the audience each game can get. What good are the handful of games that Nintendo buys if they're on an undesirable platform and as such will only ever be played by a minority of gamers? I mean the IPs you are talking about are even only played by a minority of Nintendo console owners while Nintendo console owners are already a minority.

Nintendo going 3rd party = good for majority of gamers. Nintendo staying small and insular = good for only a minority of gamers.

Can you list me an alternative to Metroid, Pikmin, or Splatoon? I can't think of a game that is comparable. 

You are on a damn sales website.  You don't have to think about it.  Just look it up.