Ok, let me see if I can try to summarize this to keep it clear for everyone. Nintendo preventing developers from using HD is probably a strategy related to the following:
1) Cost
2) Inferior Image
3) Technology
Obvious not an end all be all comment, so please correct and adjust to your leisure. Please remember, this is just a summary more than anything else.
1) Cost: We know that there were rumors that Nintendo produced 2 specs for the Revolution. One that was compariable and might even outperform the X360, and one that is a low cost solution. Given the emphasis on the low cost and price sensitivity of casual gamers, they went with the lost cost solution. Assuming this, Nintendo will probably price their console between 200 - 300 at launch, most likely around $200 like the GC. They can probably achieve this by reducing the number of ports, no harddrive, and selling accessories to access Component video/digitial audio (similar to X360). On the inside of the system, they would have to use less powerful hardware such as, CPU and GPU to achieve the right cost. However, the technology would still allow HD to be implemented if they desire, but it might not look as good as the competition, especially comparable EA Games.
2) Inferior Image: To stay competitive, programming at HD resolution might give the Revolution Hardware an inferior image to the casual market. Since that is the market that do not have HD equipment. If Nintendo decides to allow HD resolution into its games. We can easily assume that developers will port inferior looking versions over to the Revolution, assuming they are using the same resolution on all platforms. It is probably true that Nintendo lock it to 480p to prevent EA or similiar multiplatform companies from doing same resolution ports that will make their hardware look bad. Forcing them to port to a lower resolution will boost framerates, anti-alising, and filters to make the game look better and maybe even be superior than other platforms at 480p.
3) Technology: It is very possible the RevCon was designed, tested, and enhanced on a 480p screen. Boosting resolution, means that the RevCon will need to detect finer movements. Since HD Resolution is at least 4x sharper, it might demand more accuracy from the RevCon. More accuracy might mean better technology, which means higher cost. Since this is a Pioneer tech in gaming, it might be smarter to play it safe and stay at 480p.
Another thing to look at is if display technology is at a point where 480p is being Max out. Max out being that we are at a point were technology is able to produce graphics where nothing else better can be achieved unless we go to a higher resolution. So all the technological energy and effort used to run games are a higher resolution should probably be used to make games look more realistic instead of simply sharper. Nintendo is probably developing technology that is focus more on doing things really well at 480p than at various resolution. For example, High resolution makes polygon edges more apparent than lower resolution. So with a 480p lock, they can ask ATI to focus less on max polygon count and more on lighting (HDRI), multi - texturing, anti-aliasing, reflection, etc.