@Rol: I think it was a good theory. But it doesn't hold the cost of manufacture inside. But, it's possible that the pricut might have lead to selling GC under the cost for a moment.
GC had two customised "cheap end" processors as CPU and GPU, though the memory solutions might have been expensive. But it's hard to say, in the end it's about the price it was sold to retail.

@Richard: Umm... When you're planning to sell anything, you should be planning to sell it at a profit. What Nintendo was prepared to, was record-breaking profits.

Now, a few oddballs in your post:
Nintendo intented to expand the audience, by reaching previous non-gamers and lapsed gamers. If Nintendo had intented to sell to casual gamers, they would still be fighting for the same core market they did last gen and gen before that and a gen before that. I don't know how many times it needs to point out, that Nintendo was after new audience, before people understand it.
Judging by "wanting few killer apps", this seems to be what the core audience wants. Looking at what people say on message boards, assuming they consist mostly of core gamers, all they want is "killer apps" and everything else is shit. This is also in contradiction with "Wii owners buying any kind of shit".

But yes, Wii was designed also for a situation if it flops so, that Nintendo would try to disrupt the industry next gen. However, Nintendo could have made a "powerhouse" console that would've made the required amount of money to keep going to next generation in a case of a flop.

Actually I was talking the whole console market handheld (where they hold > than 66%) and TV but not peripherals. I wasn't sure of the nature of your question.

I noticed there were a couple of people implying that hardcore players are loyal and casual players are not and its the complete opposite!

To quote a car analogy its the casual guy that goes out and buys a buick because his dad always bought buicks and hes just continuing the trends. Its the hardcore guy who will cross shop, wait for deals and generally research which is the better deal. Now in relation to consoles, the casual owners are the most loyal because they only buy one console and they tend to buy the console which is more familiar to them, word of mouth etc. The hardcore owners change at a whim. If you release a console that they don't like they'll simply abandon you and then complain to everyone that you've made a sucky console and they tend to buy multiple consoles because they can. So who is a 2 or 3 console owner loyal to? They may buy a lot of games but you can't be sure to capture their attention.

Exactly, the more informed you are the less likely you're going to buy something based on name brand alone.  

"Does the Wii prove that the HD razor/blade model is flawed?" It's not flawed at all! I have a 1 year old PS3, I have bought 18 games and 16 blu-rays, plus 6 PSN games. YES, Sony recouped their initial lose when they sold me a PS3, and THEN SOME!!! And i'm going to be buying many more games and blu-rays in the future. So what's the question? My question: Is there 18 games you would want to buy for the Wii? And do you realise the blu-ray angle in this, an added recoup/profit stream which is something the Wii and 360 don't have?

My Answer: Yes. 

My Question: You do realize people on forums aren't the masses right?  You're an exception to the rule, the rule being Sony has lost a shit ton of money because of following this model, not only going into the negatives with the PS3, but not making as much as they could have on the PS2 and PS1.  So keeping in mind the attach rate for the PS3 is not like your own, how do you see Sony making a bundle on the PS3, and how is that a good business model when people like you are few and far between?

Especially when the PS3 has the lowest Tie Ratio of the 3 consoles.

not really...

^^^It's only .03 off, but it is still true