Why would a fixed home console that ran the same games as the portable sell "very little"?
That would be like saying the Switch Lite is pointless because that would also sell "very little" would it not? Why does it apply to one and not the other?

How would it be a huge investment?
You do realize Nintendo is simply using an ARM SoC paired up with cheap LPDDR memory and cheap NAND? There are android "TV Boxes" that do the same... Nintendo's done all the investment and hard work already.

Let's take some rubbish (H96 Max M9S) Chinese product from Ebay with it's markup... Sells for about $200 AUD.
It's got 8GB of Ram (Twice as much as Switch), it's got a RK3576 SoC with 4x Cortex-A72 cores @ 2.2GHz + 4x Cortex-A53 cores @ 1.8GHz - Vastly superior to Switch, GPU's (Mali vs Tegra) ends up being roughly the same...
There are of course other Android "TV" devices with 4GB of Ram which sell for about $50 AUD, but tend to run with Rockchip 3288 and wouldn't be great for any kind of gaming, but that's the price brackets we are talking here... $50 - $200 AUD.

Switch Lite is $300 AUD.

So even with better hardware... We are already $100 AUD cheaper by ditching all the mobile components, there are going to be budget-savy households where that is going to be super appealing, especially as inflation and household budgets keep blowing out.

I know I would choose a $200 Switch 2.0 TV over a $500 Switch 2.0, not just because of price either.

Switch Lite was pretty much the same hardware as the original, with components cut out to reduce cost, so it would've been very cheap to develop.

The OP describes the device in question as a "powerful console" that would "compete with PS and Xbox"; that would take a lot more than just some cheap mobile components, you'd have to invest some serious money, and I doubt it would be worth it commercially when the audience who wants graphics will still find it lacking due to all its game being held back by the portable SKU.

Here's an idea on how they could test the waters on a dedicated home console model.
If Nintendo REALLY want the Switch to pass the PS2 (I'm almost sure there are PLENTY of executives, employees, and high ranking members over there that really want that to happen: Especially the OGs like Miyamoto.)
They can give a "sorta" price cut/extend its life cycle, much like they did with the 3DS when they introduced the 2DS/New 2DS models.

At some point either before or after the Switch 2 launch, doesn't really make a difference when, reveal a Switch home console model where all you have is the console and a Pro controller. No joy-cons, no battery life, no dock. Just the console and its essentials. And because it doesn't have to deal with the stuff that the Lite does, they can sell it for SUPER cheap. Because the Switch is basically a more powerful, more modernized PS3/360/Wii U in terms of specs. They could sell that for $99.99 MSRP. Maybe even cheaper and still break even or even profit.
If they did that, I could see that model REALLY doing numbers in the smaller, more miscellaneous markets that carried the PS2 for a long time, like Eastern Europe, the rest of southeast Asia, South America and the Caribbean, etc.

I always was a huge fan of handheld systems. All the way back in the 90s I always preferred the Game Boy over the NES and SNES. Later the GBA was my main gaming system, after that followed the glorious PSP.

Today the PS5 is the only not-handheld device I own. For the sole reason that I want to play GTA 6 next year. I'm not even using the console at the moment, lol. My main PC is a Lenovo Legion Go, before that I rocked the Steam Deck. So I love Nintendos apprach. Technology has come so far that there is no need anymore for a gaming system to be bound to a certain place. I love that I can take all my gaming stuff with me in a heartbeat. If Nintendo were to ever release a traditional home console again, I don't think that I would get it. I already skipped the Wii U. It didn't appeal to me.

That is exactly what a Switch TV would be.

Components cut-out to reduce cost, so it would have been very cheap to develop.

The Switch has significant clockspeed headroom on it's SoC, overclocking results have shown marked performance improvements upwards of 50% or more...
But that's taking clocks from:
CPU:
Default: 1020Mhz
Overclock: 2090Mhz
A 104% improvement. Aka. Doubling.

GPU:
Default: 768Mhz (Docked)
Overclock: 1305Mhz
About a 70% improvement.

Memory:
Default: 1333/1600Mhz
Overclock: 2500Mhz
A 56% improvement.

Some games see significant improvements to framerates of 50% or more, two of the Switch's biggest bottlenecks is the CPU and DRAM bandwidth, the CPU is held back by ancient ARM A57 cores clocked at only 1Ghz... And 1600Mhz Ram is not setting any records.

This would bridge the "gap" to the Xbox One easily enough.

******

Nintendo doesn't need to compete with the Xbox Series X or Playstation 5, it just needs to be "good enough".
And I would argue many ports are not offering a "good enough" experience with muddy textures, low resolutions, lots of pop-in and sub 30fps experiences.

Macho Nacho has been working on his own Switch (Pro) home console prototype?

Double the stock clock speeds at the same hybrid temps? Leading to a smooth 60fps? Interesting this is!

Yeah, WiiU wireless tech was really good, so if anything that wireless connection wouldn't be a problem for them - both Quest and some PC headsets that have wireless options run really good via WIFI 6E, so I would really love to see Nintendo taking a shot at VR, either via built-in VR headset or as an accessory to home console.

I don't think Nintendo are in the position anymore to compete with PS and Xbox in that market segment, that was proven already during the Gamecube era. Nintendo was forced out on competing on power, and was forced into pivoting to Wii to survive in the console space. Those that care about graphics the most will never shift away from their PC, PS and Xbox into a Nintendo home console.

The Gamecube was a capable machine with better specs than PS2, and it was a totally uninteresting product for anyone but hardcore Nintendo fans. It was also ignored by third parties who only cared about PS and Xbox, the same would happen with a new Nintendo home console.

I don't get your point. Switch is evidently competing with them when it comes to sales figures, not when it comes to power. A Nintendo home console could never compete with them on sales figures though, even if they could compete on power. A powerful Nintendo console wouldn't stop Square Enix from making new Final Fantasy games only for Playstation, and same for the other big third parties.

If Nintendo released a home console that was as powerful as whatever Sony had on the market within the same gen? I'd be on that faster than a fast. They haven't done something like that since Gamecube... which was (not coincidentally) the last time I stood in line overnight for one of their consoles. I'd be over-the-moon excited.