Why I don't think the bubble will burst.
1. 8 million installed users in less than 8 months.
2. Cheap to develop for.
3. Continued domination of Japan, PS3 is too expensive, too big to sell like the ps2 did and 360 won't sell unless something majorly unexpected happens (i.e. 200 yen for premium model, final fantasy, DQ, etc.)
4. DS connection, not just connectivity but the psychological connection. Synergy is key. Products complement each other, so do the games and vibe. And we all know, the DS prints money. PS3 associates itself with PSP well, and 360 with Windows but both face a negative stigma with those products.
5.If 360 drops in price and starts to threaten Wii dominance, Nintendo is in a better position (because they actually profit) to drop the price or include a different game to increase sales.
6. $20 and $50 games. I know that they are planning on charging $49.99 for touch generations style games (Big Brain already is). But in their "Worst case scenario" they could quickly and easily expand the library with $20 t.g. games if needed. They can also repackage GCN games at $20, they might even quick port them for wii, and toss em in with a classic controller like Wii Play was included with the Wiimote. Suddenly at Christmas, Mom can buy a 360 with 30 games available for $29.99 or a Wii with 100+ games available for $19.99. Don't under estimate budget titles, these are what killed the N64 and brought dominance for PS1 and 2.
7.Impulse purchase for families is not $249, it's $199. This snowball at $199 also goes hand in hand with budget titles and cheaper used peripherals. (GC was $199 but nintendo was very slow to lower games to $19.99, Mario Kart Double Dash was $49 for two years.)
8. Harcore gamers are trend setters, this is how we got into this quirky/non-game thing in the first place. Hardcore dropped Street Fighter 2 and went to Golden Eye then Parappa the Rappa, while the Casual went from Mortal Kombat to Halo to Guitar Hero. The true hardcore are always itching for some new way to play.