Nintendo is a much better fit to partner with Microsoft next-generation, anyway, for several reasons, actually (I'm not saying it's going to happen, but if it did, I wouldn't be all that surprised):
1) Sony is now an even bigger threat to Nintendo's profitability with the release of PSP which competes directly with their cash cow Gameboy handheld line. This is in addition to Sony's wiping the floor with Nintendo in the home console arena already. Nintendo, if at no other time in it's history, is very afraid right now. Plus, there's the whole animosity factor between the two companies, while Microsoft has been pretty cordial towards Nintendo in past dealings.
2) Microsoft and Nintendo are like 2 different, yet complimentary pieces of a jigsaw puzzle... Microsoft is getting strong in the west, while remaining weak in the east and Nintendo is still respected in the east, but losing market share in the west. Microsoft's software caters to the 18+ market while Nintendo's is skewed (like it or not) to the younger market for the most part. In short, Microsoft is trying to grab marketshare through increasing it's youth appeal and east appeal and Nintendo is trying to do the oppposite! Nintendo is very strong in the handheld market, which Microsoft has no presence and both companies are looking to do better next round in the lucrative home console market against Sony. Microsoft is working extremely hard to court 3rd party developers/pubs and build a strong online community (both of which Nintendo doesn't do very well right now). Microsoft's also trying to build long-term franchises, which Nintendo has already done.
3) The Xenon hardware, from what we've heard so far, sounds incredibly like a Nintendo made piece of hardware, but only juiced up even further. It sounds efficient and cost-friendly (in the long term) and yet still very powerful. Microsoft has changed their stance from earlier this generation from being about "More Powerful Hardware" to "it's all about the software" which sounds...eerily like Nintendo's company line. Microsoft is using parts from ATI and IBM, just like Nintendo is. Most companies that work with Microsoft tend to speak very favoribly of them (it's the companies that compete with Microsoft that really hate their guts).