Questioning the Wii's horsepower is nonsense. It's an upgraded gamecube. But does anyone care?
Wii has these things going for it:
1) Outrageous sales figures (it will surpass the x360 in a matter of months, despite being available for half the time, and PS3... roflcopter)
2) Must-buy status
3) Novelty
4) Less than 25% of the manufacturing yield is scrapped, so x360 loses
5) Cheap, so PS3 loses
6) Comparatively nonexistend development costs (similar to the already well-known GC, and graphics don't have to be cinematic to be competitive with other games on the system)
Going against it are:
1) "casual" status
2) Far weaker than anything else in terms of raw power
3) Heavy competition
4) Virtually nonexistent online gaming system
The end result though, is the one any game devloper/publisher can see:
1) Larger install base with no signs of slowing
2) Cheap, easy development
3) PS3 is too expensive for most people, and will continue to be for some time
4) Xbox 360 has excessive failure rate
As a result of point #1 alone, Wii is the best system to develop for. How much importance is the size of the install base? Playstation 2. That pretty much ends the argument - an inferior system compared to the GC and especially the original xbox, despite having a similar cost (no $200 difference like today). Despite it being inferior, it had the largest install base because it got to market first. Then it dominated everything else.
Graphics don't matter if you as the developer need to be certain of selling a large number of software units just to break even, due to the rapidly escalating development costs. Wii is therefore the system of choice for developers from this day forward - Cheaper development, less sales needed to turn a profit, larger install base to sell to, easy to develop for, and ripe for the first series of AAA titles.
The proof can be seen in the number of games coming to the Wii by the end of the year (e3 presentation said "100+" I think, or possibly 150, more than doubling its current library), as well as the speed at which major exclusives are being lost... even if sony "doesn't need GTA4"
The novelty factor is fading fast, but it's being quickly replaced with real long-lasting appeal thanks to the lineup of games that actually use the motion sensing to real gameplay benefit, rather than just as a gimmick.
Finally, the fact is, Nintendo is thus far the only company to even turn a profit so far. They had profit at day one. They have all the advertising and R+D money in the world as a result. And as we all know, unless you're Sony, advertising can... well, I don't know how to end that sentence, I just wanted to take another shot at Sony's incompetence this time around.
In short, barring some kind of miracle (a PS3 price drop at this point is seen by a logical customer as being a bad sign rather than an opportunity, although x360 has scored some points with their new partial warranty), Nintendo has enough momentum at this point to just let capitalism and publisher greed take over. Instead they're actively supporting the console with first-party titles of every genre to set the bar, developing new peripherals, and making deals to bring more and more games to their system.