I don't see particularly why the quality of their games would drop. Sure supporting multiple systems is more than supporting one that you know inside out, but I'm sure they could handle it! The increased game sales would bring in more than enough extra revenue to fund whatever extra staff supporting multiple systems would cost.
Just look at Mario Run, there's a thirst for quality Nintendo titles not on a Nintendo system. Now I think, if Switch is the price it's been leaked to be (£200-£250 in UK) then it makes it a far more attractive proposition and might mitigate Nintendo ever even thinking of going third paty if they can Switch a success. But lets say it flopped.. Nintendo could sell SHIT LOADS of games if they went 3rd party rather than only supporting their own struggling system. The money left on the table is huge.
And regarding their more niche titles.. I don't see why they would cease to exist. So long as they made more money than they cost to make why wouldn't Nintendo keep making them, keep broadening their range of IP's. If anything going third party might push them into broadening their range of IP further, to take advantage of markets they don't really foster very much on their own consoles. Look at Splatoon, Nintendo's take on a FPS, and look how well that game was received. If you could have bought it on PS4 and XB1 it would have sold millions of copies. Nintendo could EXPAND their range of IP's and game genres, rather than limit it. Mario, Zelda and Pokemon would, like Hollywood Blockbuster films, help to fund the other niche titles and experiments outside of their comfort zone, where a hit and new IP could be born, just like Splatoon.