It would make sense, anyway. Most of what happens on PS360 is not fundamentally impossible on Wii. Usually, it's just the graphics, rarely enough do developers really take advantage of the other technical capabilities of the PS360. Developing a scalable multiplatform engine could solve these problems

But the big western development houses like to be resource hogs. They like to make games that take advantage of powerful hardware, and to work in an environment without limits. However, the people saying the audiences are fundamentally different are right. People who want PS360 games buy them on their PS360, if they make PS360 type games for the Wii, they are going to fail, by and large.

It is not the case that a Wii game has to be casual or kiddy, but it does have to be different. Less focus on depth and cinematic experiences, more focus on fun. Simple mechanics that can be expanded upon, rather than complex worlds. This is why Japanese developers have been in the lead on the Wii from the start, and that trend is only growing more apparent.

Developers would have been more than happy to cater to the Wii in this instance. Nintendo will suffer with poor third party support for the remainder of this generation because of their unwillingness to put themselves out on a limb. Nintendo could have charged 400$ for a system essentially identical to the 360 in terms of power and graphics + motion controls might have dominated an entire industry to their product.   Instead,  they will only get a 'half' victory this generation.

Actually, I would argue that Nintendo went out on more of a limb than any other system has ever done in the past, up to and including the DS.  By largely foregoing the march of graphical progress in favour of focusing on developing a totally different control scheme, they basically went all or nothing on this generation, and they are being rewarded immensely for it.

To some extent you're right.  But I believe Nintendo has learned one thing.  They have a hardcore, rabid fanbase that will buy a 'Nintendo' something almost every generation if only for (Mario, Mario Kart, Zelda, Metroid, etc).   So yeah they went on a limb but most old school Nintendo buyers would have got one regardless of the control scheme. 

As for going all or nothing on this generation?  I disagree.  They released several year old hardware and made sure their profit margins would be solid regardless of the system outcome.  They know they can get by with brand loyalty and name, they just don't know if they can dominate the market (With big budget companies like MS/Sony).

Nintendo could have had a PS2 type of dominance (Software sales and support/Hardware sales) this generation had they released a comparable graphics system to 360/PS3.  Instead, they will just take a moderate victory this generation.

As for producing an underpowered system, I think it was a well calculated strategy.  In the event that the system declined into irrelevance, Nintendo always has the DS to continue making profit from.  In the event they dominate, as they are now, third parties would be forced to either develop for them, or many would go out of business for want of marketshare. 

It's a well calculated strategy to maintain adequate profit.  It's not a well calculated strategy to destroy the market in terms of impact.  Software/Hardware.  (Like the PS2 did).   Which is exactly why,  I said Nintendo played it close to the vest (Like usual).   Had they put themselves on more of a financial limb,  they would have without a doubt the most popular system in terms of hardware sales, software sales and third party support.

We've seen the beginnings of the latter scenario in Factor 5 and Free Radical, and combined with the recession, the balance of power in the console wars threatens to swing violently in Nintendo's direction, unless something is done to stop third parties from hemorrhaging cash.

Third parties will simply make more of their games multi-platform between PS3/360/PC or require lots of extra money in order to maintain exclusivity. 

I see this Factor 5 / Free Radical argument a lot but quite honestly what huge games has Factor 5 created?  This industry is just like any other,  if you make nothing but mediocre to below average games your company will go out of business.  Factor 5 (Not that I know of has made anything of GREAT relevance atleast in recent times.

Free Radical was a good development studio,  but let's face it even Time Splitters for PS2 (While  a good game that was fun) was no where near the type of game that Halo for the Xbox was.  It was a good game but there is a reason that Playstation series has notoriously lacked quality FPS titles.    Timesplitters was a decent game on an extremely popular system.   

I mean let's face it,  Rare was excellent during the N64 days but they haven't found their footing this generation or even the prior generation nor has anyone that really came out of that mess.  Things change.   That's what keeps the industry moving forward.

Just to keep things in perspective...

For your assertion that the Wii was the safe bet, we are going to have to agree to disagree on that one.  If you remember the GameCube last generation, Nintendo was on the verge of being rendered totally irrelevant in the console wars.  The number of loyalists who would buy their hardware no matter what had gotten smaller than ever, and by 2005, people never spoke of the GameCube when it came to console gaming.  When you consider that they totally defied everyone's expectations by diverting their focus from graphics to controls, I can think of no bigger risk they could have taken.  The PS3, I hold, was not (meant to be) a risk in the least, because it stayed in famliar territory and took the route of "bigger and better", which was exactly what the gaming media and the market expected.

You and I are talking risk to totally different quantities.  I'm talking the Nintendo bottom line (And by bottom line I mean money).  They were taking no risk monetarily (In terms of losses) on the Wii.  Minimal sales probably still would have been enough to form a profit on the system. 

Coming out with a new controller isn't that risky as far as I'm concerned. (Nintendo has released a new controller type every generation thus far) Which is all the Wii has done. 

Risky, would be doing something like Microsoft did last generation or similar to what Sony did this generation.

On the idea that third parties will simply make their games multiplatform, isn't that what they're already doing?  As well, how much more money can third parties demand?  Rockstar got $50 million in assistance for GTA IV, and their parent company recently posted a loss even after selling 13 million copies!  I've been watching the third party financial reports, and I'm seeing that even companies like EA are losing money in the face of record revenues (granted Activision is still making money, but World of Warcraft is an exceptional money-printing case).  Simply put, the reports make me question whether HD game development is fundamentally sustainable given the current methods in use.

The costs of HD development will drop.  SD development has forged onward for years, we are just reaching the end of that line. Costs are essentially as low as they can get for SD development.  HD costs are going to do nothing but fall.  Especially as HD adoption rates continue to skyrocket. 

Companies will continue HD development because they have devoted tons of money into it. 

Additionally,  Wii Third Party proponents act like the Wii has proven itself to sell tons of 'standard' third party software.  I mean that chart from several pages ago (With an install base of 40+ million)  RE4 only manages to sell 1.66 million?  Let's face it, Nintendo is known for their first party titles far more than ANYTHING else on the system and always has been. Thats where most of the sales reside.  Thats where most of the interest resides.

Most people don't buy a Nintendo console for it's wide array of third party games.  Most people buy a Nintendo console for Mario and Zelda and the whole host of related themed games.  This is competition that developers aren't interested in competing with.