So far as I can tell, the lack of programmable shaders shouldn't be a problem if programmers tried using their imaginations and brains a bit. Factor 5 achieved Normal mapping on GC (on the graphics chip) by going into low level machine code.
GC was capable of hardware specularity, environment mapping and bump mapping without any particular coaxing.
Shadow of the colossus either achieved or cleverly faked fur shading, self shadowing, soft shadowing, vector based motion blur, HDR lighting, bloom lighting, a couple of sort of specularity effects, volumetric fog effects, and even a kind of sub-surface-scatter effect, ON THE FREAKING PS2. Sure PS2 had vector units on the CPU, but the GPU didn't even have hardware transform and lighting. My point is, if developers tried, they could do versions of all these effects, and add Normal mapping and depth of field for good measure, on Wii.
As it is, developers are treating Wii like it was an N64. I've heard developers talk about how it's difficult to do environment mapping on Wii. NINTENDO DID IT ON THE FIRST N64 GAME!! EA said it was impossible to do Inverse Kinematic type animations until Xbox 360 came along. NINTENDO DID IT ON WAVERACE 64!
Like all the problems with Wii games to date, I put the current limits of displayed graphics down to laziness. Wii doesn't appear to be less powerful than Xbox on any particular part. It just seems to be less flexible (read: developers can't use their basic lines of shader code without thinking).