N64 and Game Cube had better graphics than their competitors, but Nintendo's older games were not any less than their modern games in terms of game design. Therefore, the question of "imaging what Nintendo could do with better hardware" is already answered.
Nintendo started to focus less on graphics from the Wii era onwards because they realized that the game industry (mainly game critics) did not reward the amount of effort put into graphics (or technology in general). Even though N64 and Game Cube had better graphics, they did not sell more. Nintendo decided that competing in that established market was not worth it, and they tried to reach new audiences (who did not care much about technology) with ideas such as motion control, 3D screen, Wii U pad, and now the hybrid concept.
So, does graphics make better games? As someone already mentioned, it matters to certain demographics, the real problem lies in the concept of "better", or what defines a good game in general. The game critics' rating system, such as metacritic (which seems to me that you have solely relied on to decide whether a game is good or not), does not give enough weight to graphics (or technology in general) when evaluating a game. To put it simply, the demographic that has the power to give scores to games, that had the power to influence public opinion towards video games, does not care much about technology.
Now for a thought experiment, what if every media outlet that gave scores was like Digital Foundry? This shows that in terms of art criticism, good or bad are subjective. It is not the game's fault that graphics or technology are not taken seriously. However, for the demographic who cares about technology, no amount of convincing will change their mind because there is no definitive way of enjoying a certain hobby. Just like how people can claim "story does not matter in video games, video games should only be about game mechanics", or "graphics do not matter, video games should only be about fun" are both arrogant assumptions. No one should have the right to dictate what a medium should or should not be (the semantic of "video game" should not matter here). There are people who play video games only for the story, and there are people who prioritize technology over anything else. Enjoy what you think is the best and do not try to stop other people from having their fun.
