So, the best move is for Nintendo to upgrade what it is already doing?

If they'd done only that, the Wii wouldn't be selling nearly as well.   Nintendo needs to pull yet another rabbit out of their hat.  This generation should prove that simply upgrading the current stuff  doesn't work.  Something new has to come out.  Still, everything you mentioned would be awesome as well.

No.

i don't think every single generation needs to have some kind of revolution for a system to win. ps2 didn't do anything special, it just had the 3rd party support and built on the momentum that the ps1 made. ps1 brought cd's into the game and won cuz that made 3rd parties flock to it. snes won cuz it continued the dominance of the nes and had hands down better games. nes was the only thing around so it won. wii is gonna win this gen cuz of its motion controls creating a new way to play games and the other two companies shot themsevles in the foot by bringing out very expensive systems with hardly any good games in the first year. so nintendo doesn't need to do something crazy to win next gen. what they should do is upgrade the hardware to 360/ps3 levels, put a big hard drive in there (60gb maybe), make a big upgrade on the motion controls so 1 to 1 motion control will be in all games that need it, use a disc that holds more info than dvd, maybe like two to three times as much, set the system up for 6 or 8 players instead of 4, if they have another remote/nun-chuck combo make it wireless, and have a great online service set up from the day it launches, price is at $250 and watch it break all the records as it get great 3rd party support from launch instead of 3rd parties being caught surprised by it and even then shying away from it for who knows what reason like they are now. all they gotta do is improve. improve hardware, motion control, hard drive, online service, disc size, controller, and number of people per system.

if you are looking for another revolution or something entirely different i don't think thats gonna happen. the big jump will probably be in the form of vastly improved motion controls. beyond that its just about adding in the best things from the other two systems of the current gen and keeping that mass market price. i mean think about it, take the best from all 3 systems, wii's price, and much improved motion controls. that would be sick. maybe even the ability to download all the VC software from your wii onto the wii2 (probably they'd make it so you'd have to register your wii with the wii2 so you could only take your own games)