There's no point in keeping pace tech wise. 3rd parties won't support it regardless of power as they'll assume their games won't sell(and frankly don't want the hassle of supporting an additional machine), core gamers won't buy it because they know 3rd parties won't support it. Power is largely a non-issue.
If Nintendo released a machine twice as powerful as the PS4 or Xbone next week..Bethesda still won't support it, EA still won't support it, Take Two still won't support it, Konami still won't support it, Square still won't support it.
Correct. And selling it at or near cost would alienate even more people than the Wii u has. They need to aim low not high, despite hat hardcore gamers dream of.