Not trying to sound like a troll, but the PSOne and 2 weren't consoles based around a novelty as seen by the general public. Who knows what will happen anyway. Nintendo certainly have the money to make a truly huge leap into HD and greater power, it just depends how greedy they've become.

But the PS1 did capture a wide array of demographics just like the Wii. Then everyone bought into the PS2 despite little innovation.

These same demographics (and more) are now getting the Wii, so in principle a lot of people may upgrade.

Can't imagine what Ninty could make to convince Wii-owners to upgrade to Wii 2, but I bet they have got a plan. Wii-brand is damn strong nowadays, like PS-brand used to be at late era of PS1. I assume this's the main reason that DC wasn't successful - not enough hype and promotion to overcome PS1 success - ppl who started playing on PS1 were waiting for PS2 release, nobody wants DC - neither gamers, nor developers. I expect Wii 2 to be even more successful than Wii.

Wy do people upgrade their iPod?

The OP should also read the Malstrom chronicals. Regardless if you agree with them or not. It's interesting to note that one of them is titled around "Nintendo must kill the Wii before the Wii kills Nintendo" this revolves around the idea of a Wii2.

it'll be very tough for nintendo's next system to sell better than the fastest selling system ever. now they could come out of left field again with some crazy new innovation again that brings in new gamers and all this gen's new gamers just like the wii. but i mostly just see some big upgrades for the next system. i think the key is the software. wii sports sold the wii to a new market and then nintendo built off that momentum and reputation. they need at least a couple games at launch that really capture the attention of that market again and they can repeat the success.

along with some landmark software at launch like wii sports, here's what i think they need to do with the hw to maintain the wii's success:

HD graphics and ps360 level graphics (some people say casuals aren't interested in this but in like 4 years that technology will be cheap so it would be insane for nintendo to not go to hd, sticking with sd this gen was fine, but obviously next gen wii will be hd).
The software discs need to be around 10gigs.
Harddrive or flash memory should be 20gigs.
They need to change their online policies so that a real online community can be developed including maybe having owners make an online profile like a facebook type thing but you just list what games you have and it shows your mii or whatever and pictures and maybe your gaming stats downloaded from your games and have whatever else you'd want to have in a gaming profile along with your screenname (not a 12 digit friend code!) and you can add friends, send messages and chat (with wiispeak 2), and look at/add your friend's friends cuz the only thing wii online really needs right now is a way to actually add friends in game and one screenname instead of a different friend code for every game. also have this same social network for the next handheld so the wii2/ds2 gamers can communicate through this.
A camera on the controller to make another photo channel actually worth having.
Backwards compatibility with the wii.
A continuation of the VC and wiiware and be able to download all of your current games from wii to wii2.
And then i imagine another remote/nunchuck combo but this time make them the same with the same functions but make the fit opposite so that one is for the left hand and one is for the right (lefthanded gamers can still play link lefthanded). they should both have motion control one step up from motion+, IR pointers (in fps if dual-wielding you can aim each gun in separate directions!), rumble, camera, upgraded speakers, little bit of memory for mii2's and game save files, and they should each be wireless and not connected unlike the wiimote+nunchuck. basically the ultimate motion controllers.

i think with all those hw upgrades plus universally attractive software like wii sports the next nintendo system could possibly grab back a wii-sized userbase.

I don't think it will sell that great. As you said, most of the casuals who are buying wii's now won't need to upgrade to the next one. Put that along with a well priced PS4 and Wii 2 won't do as well. I think it will be a bigger disappointment sales wise than PS3.

Do you have a link to this? I couldn't find it, does it go by a different title?

I don't know if it will sell as well or not, it could sell better for all I know. The Wii Two will be released as an answer to any attempt to take Nintendo's market, which is likely to come from Microsoft.

One thing is for sure: it will have full backwards compatibility. It probably will look very similar to Wii. They may even drop the original Wii models and introduce a model that is still at a mass market price, but simply functions as an improved Wii that can also play something new(whether that's in HD, or simply an even more improved control system).

Nintendo's next system will have better 3rd party support right from the beginning rather than having to wait years and years for them to actually step up. This will give Nintendo an advantage right out of the start convincing many people who despise the Wii right now to get one. I doubt it will be as successful as the Wii, it's going to be hard to top, but it should definitely sell strong.

....for the same reason that people who bought a first gen ipod aren't buying the countless number of upgrades..

oh wait they are