I think Nintendo is doing the right thing on this.
Comparing current gen (PS2, XBOX, Game Cube), PS2 easily won the battle. I own all three systems, and the variety of titles made the PS2 win.
For next gen, I see Xbox 360 (I own one of these too) winning the total battle. PS3 will just cost too much if current info proves true. Many consoles sell on basis of titles, which is why PS2 beat XBOX. With the 360 getting a head start, and many 'console seller' games such as Grand Theft Auto releasing on both systems simultaneously, I think that it will be either equal or surpassing PS3 sales.
Nintendo isn't going to try to compete for best graphics or sales, but instead focus on innovation and quality products, just like our favorite computer company.
I will buy a Wii (though I prefer the 'Revolution' moniker). I can play the classic NES, SNES, N64(?) games in addition to new titles like Zelda? Count me in. Super Mario Bros 1-3, Super Mario World, StarFox 64, and Goldeneye? Awesome.
I actually find myself playing New Super Mario Bros on the Nintendo DS more than I play my Xbox 360.