I could see them retaining the DS slot for a generation, just like the DS had a GBA slot. The DS slot is reasonably small anyways. It's the GBA slot that ginormous.

The main factor preventing this type of device is that it will make retailers quite upset. Most of the money made at the retail level is through game sales.

Another thing I want to add:

I could see a couple reasons Nintendo would wanna do this: You can't sell back your used games, or buy used games. They could offer the games at a lower price point (no shipping or whatever).

Couple reasons Nintendo would NOT wanna do this: Probably easier to hack/mod and just download games from the internet (maybe not).

I don't think hacking would be a big problem. The vast majority of people either don't have the knowledge or don't want to risk bricking.

Like I said before, the biggest problem is upsetting the retailers.