Wishful thinking, even with Nintendo's internal knowledge of their CPUs. They'll be faced with what Sony's facing with Gakai: recompiling every game, game-by-game, which is a herculean task that will not result in perfect emulation by any stretch.
If Sony intends to offer streaming of PS3 games they have no choice but to use actual PS3 hardware in their servers. No other hardware out now or in the foreseeable future could emulate PS3's exotic system architecture at usable speeds. PS3 emulation is out of the question.
Emulation also doesn't require any alteration of the software being ran, in worst case the program accesses the target hardware in an unconventional way (coded "to the metal") and needs a custom driver. Not needing to replicate the API and drivers from scratch would be a major advantage for Nintendo. GC/Wii hardware isn't terribly complicated and even Dolphin already provides more than satisfactory experience with the large majority of titles. It simply requires high specs.
First thing's first, even if Nintendo released a system targeting Xbone performance, the third party support wouldn't be there as many have suggested over and over. Second, if the system were priced even higher (despite the proposed increase in specs) it would be tanking even harder, and losing more money per console than it already was. A recipe for disaster even worse than its current recipe.
Nintendo failed to generate any positive buzz about the system from the very beginning.
They never bothered revealing the specs and the early software didn't show marked improvement over high end Wii games, let alone PS360 ones. This led potential early adopters (dedicated gamers) to believe it was not a worthy upgrade at Nintendo's asking price.
They chose to focus their promotion on a new hardware gimmick, the much debated Wii U gamepad. A hardware gimmick that tries to replicate the gaming experience offered by a tablet. A type of experience aimed at the most casual of gamers on devices that are heralded as a threat to the way dedicated gamers like to consume their main source of entertainment. A hardware gimmick for which according to many they've yet to provide a compelling example of use.
True it was a hardware gimmick that created sales and ultimately won the "console warz" last time but that gimmick was simple, intuitive and above all properly utilized. The Wii U pad failed to catch on, and by the time must own titles are available, a wider audience might simply not give a shit due to tarnished reputation.
They failed to move the initial batches which usually sell out even in absence of strong software support (this is Nintendo after all). The system was plagued by software issues that required a lengthy update and could potentially brick your system. Third party publishers rightfully pulled their support which in conjunction with Nintendo failing to push their first and second party titles out of the gate created a lengthy release drought.
Why am I listing all these things (that I'm sure you're aware of) to you?
To show you that price alone was not the issue but rather the whole package and its perceived value. They could sell this at $200 right now and I personally still wouldn't buy one (at any price really).
Being a year ahead to the next gen arena would have been an invaluable advantage. After such a long generation, just the potential of improvement in graphics and gameplay alone would generate enough hype to sell through the initial batches. Strong initial sales would entice publishers to throw their support behind the system, ensuring a steady stream of (enhanced) releases driving sales even further. Who wouldn't want to play the best console version of Black Ops II, DmC, Crysis 3, Tomb Raider, BioShock Infinite and so on? Grand Theft Auto V a timed exclusive among next gen systems? Yes, please.
Gamers were hungry for something new, even if it initially just meant shinier graphics and smoother gameplay. Nintendo could've capitalized on that and maintain momentum throughout entire generation (the xbone debacle would've swayed a lot of people towards them). Now that I'm done fantasizing I'll just repeat my earlier sentiment: Hindsight is a 20/20 bitch.
