I think Nintendo should do more than just do an upgrade, rather a complete new powerful console, powerful enough to emulate/upscale the original Wii games. I would like to see the market move forward, proper HDTV focuss should of course be at the core of things from such a perspective.
If so, I consider it a new console and from a technical perspective Nintendo's first current gen console. If they take this route it may well still be far less powerful than a PS3 actually (as they traditionally release mid-level or lowly specced consoles) and both consoles with improved Wii-like controls could uppen potential in terms of game quality for the route Nintendo has taken.
From a technical perspective I rather view the current Wii as a PS2 era console (which also continues to live on despite market saturation), than a 360 level console. I think a Wii-HD could be more powerful than a 360 though.