Nintendo can do everything if they want to. But just because you can doesn't mean it will make you all of the money. So they won't.

They can in theory. In practice, it's more complicated:

1. Nintendo doesn't have any other businesses other than the gaming market. This means they can't cross-finance losses or subsidize hardware nearly as mjuch as Sony and Microsoft do. Sega tried to do so with the Dreamcast, banking on the arcade market to recoup the losses. But when the arcade market crashed, it took Sega along with it as they couldn't rise the pricetag of the Dreamcast anymore. In short it means that Nintendo out of need has to be more conservative in hardware power (high power means high pricetag) and since they can't subsidize hardware as much, Nintendo consoles would always be more expensive for the same power.

2. Nintendo sitting at Morton's fork for every new hardware and software release. No matter what they do, everyone will complain. A Mario Game? "Nintendo is putting Mario into everything!" Casual stuff? "Nintendo is abandoning gamers!" Something totally new? "It will flop because it doesn't cater to their usual crowd!" Bringing hardcore games? "Useless, the crowd for those games is not playing Nintendo!" I could go on forever with such arguments

3. 3rd party publishers. Will they bring their games to a powerful Nintendo console too or not? And if they do, will they do without masekre them first? Especially early on, I doubt so.

In paper i think they can, but in todays market.... I dont think they can

Powerfull home console + smartfones games = Yes

Powerfull home console + handheld + smartfones games = No

But hybrid market is for now best option for Nintendo.

If you put a gun to their head and forced them to, sure.

Will they? No.

They're never likely to make a standard home console ever again, it's hybrids using mobile chip components from now on until the point where all game hardware gets replaced by streaming services. The age of the "big box Nintendo console" (NES to SNES to N64 to GCN to Wii to Wii U) is basically over. 

The hardware losses stuff is not really that big of a deal anymore, even Sony/MS do not take huge losses on hardware anymore. All the machines just use the same AMD/Nvidia off the shelf components anyway, there's nothing special or heavily propietary anymore like there used to be in the 90s or even the early to mid 2000s where new chipsets were a huge undertaking and completely custom designs. Modern home consoles are just a watered down PC in a box. 

Even the Switch is nothing custom, it's just a stock Nvidia Tegra processor used in tablets. The days of PS3 CELL or Dolphin Gekko/Flipper GPU, or all these interesting custom designs is long over. 

They can, but they don't want to. They don't want to directly compete with PS and XB.

A traditional home console from Nintendo would sell only 15-20M at the best.

IMHO, I think they can't, for 3 reasons.

1. Nintendo development teams are top players when it comes to create games that are fun and have great gameplay, but they are not ready to compete in the graphical and technological front.

2. Big graphical upgrades will not fit well whit Nintendo greatest IPs ( like pokemon, mario and zelda) that are all cartoony.

3. Current Nintendo needs the "we are special and different" feeling. If nintendo becomes "another PS/Xbox" they will lose their magic and uniqueness, and that would be a big problem.

Even if Nity solves the 3° party problem they will have a hard time being "The same as PS/XBOX".

The original Xbox sold less than the Gamecube I think, didn't stop Xbox 360. Nintendo just don't have the bulls to do so.

I don’t think we’ll see a Nintendo console ever again besides their mini toys.lol Nintendo have found themselves pretty comfortable in the portable as they did it before. Taking into account that the “hybrib” is more a taming word for their fanbase than anything else. The truth is that they can’t compete at the console market level, they’d opted to stay away from it. The real question is : The portable market will be enough for ‘em? Only time will tell.