In the home arena however, I think everyone would rather have the more powerful console if they have the same amount of good games and the prices are within range of each other.
That's why the Wii isn't going to go away. I agree, more power, same price we are good. But the PS3 and Xbox Pro will never be in the same range as the Wii. And they'll never be able to duplicate some of the Wii's exclusives (gameplay). As such, the Wii is very marketable.
You might be right, but I dont think we can use the portable market to measure the home consoles. I think for the most part, folks who buy portables are not graphic buffs to begin with. Those people probably have a game they want and simply buy the system that can play it.
I think the people that buy portables are video game players and more likely than not have a home console at home. And that logic works perfectly for the Wii. It should be down to $100 by it's 5th year. That's at the point where one game might be worth $150 (Wii + game) to play it. That's something that the PS3 and 360 will never reach. Their is a very tiny percentage of the population that will pay anything to experience one game. And the 360 and PS3 are just too much, unless you are planning on buying 5-10 games a year for the life of the console.
I would just release a more powerful version with new graphical capability and a few scaling libraries so that programmers can make games that work on both the old model and new.
That would cost the Wii one of it's advantages though. Developer costs. I'd imagine that would push Wii games to the price of PS3 games in addition the time of development. In addition, the Wii will have 250 games by the time a Wii HD could possibly launch. These will have no graphical updates for the WiiHD. I think the Wii is positioned well. I'm a HD buff. But I bought a Wii. I'm soon going to buy a PS3 and start buying Blu-ray discs. But their is no way I'm going to replace my existing DVD collection. Much like I'm guessing that HD owners that have cable don't ignore the 60-70 non-hd channels because they aren't HD.
So in my opinion that is where the Wii is perfectly marketable. Sure, you bought a PS3 or xbox 360 because you wanted high def. But does that mean that you are going to ignore any system that isn't high def? You can't play your ps2, n64, dreamcast or whatever because you've moved on? The Wii costs a lot less, so you need less reasons to buy it. And it's soon going to be the market leader, which means that the game library should look very nice compared to the 360, PS3 by Christmas '08.