There's a lot of curious points made here. Iwata didn't shape Nintendo's policy regarding hardware, before him they were making similar decisions. The NES and SNES weren't the most powerful machines on the market and the N64 was a weird mashup of cutting edge tech and obsolete methods.
What? When the NES (Famicom) was released in Japan in 1983, it blew away the field in terms of graphical power, and even two years later it was still certainly the most powerful console in the US (remember, the Master System didn't release until 1985 in Japan and 1986 in the US). The NES was a very powerful system at the time of its release, and was a big leap over any other system available at the time.
As for the SNES, it has a slow CPU, but the graphical hardware -- the Mode 7 scaling layer, that you can have 256 colors on screen from a 32,000 color palette, etc -- were a big leap over anything else available. Overall, Neo-Geo aside the SNES is the most powerful system that generation, unless you count the 32X as a console from that generation. That's the only one that might beat it, though.
And the N64, it had the best hardware by far of any console that generation. So they used cartridges... so? It's still a much more powerful system than the Saturn or PS1. It was also the first console with perspective-correct polygons, which is a huge, huge advance. Z-buffering and triple buffering were nice as well.
And as for the GC, it wasn't as powerful as the Xbox, but it was close, and the system could do some very nice graphics, well above the PS2 (or DC)'s capabilities.
No, before the Wii, Nintendo always pushed hardware with their consoles -- the NES with its top-of-the-line (for 1983) power, the SNES with its graphical ability, the N64 with its best-at-the-time polygon graphics, the GC with its power and efficiency... sure, they made some decisions people disliked, like the slow SNES CPU, the small texture cache on the N64, and the small discs on the Gamecube, but they also released powerful systems that most of the time were more powerful than anything else available at the time of their release.
And then, of course, came the Wii, and Nintendo's shift in focus to less powerful systems with a hopefully broader market appeal. That worked great the first time, but this time it's not going as well...but they certainly still could catch up.
Okay and my point is that Nintendo are always trying different stuff, trying to be different. A Nintendo that attempts to go toe to toe with Microsoft and Sony isn't going to necessarily be a better Nintendo.
I also don't understand why using tried and tested hardware is a bad thing. Anything that ensures reliability has to be a plus, right?
I think a lot of people would say that one of the major reasons why Nintendo made the Wii the system that they did was because they'd tried the power thing again with the Gamecube, but it hadn't worked at all, so they decided to try something else instead. It makes sense, even if it's a little frustrating at times. (I mean, I may be a Nintendo fan, but of course I wish the Wii and Wii U were a little more powerful... but oh well, the Wii ended up as a pretty good system as it was.)