My initial reaction was like everyone elses, but after reading the article at G4 I get it now. People are over reacting. I really thought Nintendo screwed the pooch when I saw the pics, but then I read about all the functionality and versatility of the controller and I think it's actually a well thought out strategy.
The most important thing to understand is for traditional 3rd party games the Gamecube controllers will be used. The Revolution has 4 ports for Gamecube controllers.
The next thing to understand is that this is not just an infrared remote control that can be turned sideways for NES games. There is a hell of a lot of advanced technology packaged into that controller. The fact that it functions like a mouse in 3D space is pretty impressive. You've got pointer/lightgun functionality, you've got gyroscopes that can precisely control items and views just by waving the remote around, and you've got rumble feedback to make the experience more immersive.
I am by no means a big Nintendo fan, but I think this technology isn't as ridiculous as some people are acting. I think it's no more silly than if Sony were to bundle Eye Toy in with PS3. So long as you can still use traditional Gamecube controllers, I don't really see this as being that big of a gamble or risk on Nintendo's part.