That's the only strategy that makes any sense here.
You're Nintendo. You know that the next generation, absent any effort from you, will start in 2013, with systems that represent "generational" increases from PS3/360, but in a more conservative fashion -- in all likelihood, $299-ish boxes that use chips running on the cooler end of what's "up to date" upon release. (In other words: way ahead of current consoles, but not impressive compared to 2013 PCs.)
You also know that although keeping development costs down is important, a) you completely and utterly lost the battle of doing so by using low-powered hardware, b) fundamental cost issues are to some degree going to force it anyway (many companies literally can't afford to spend more money developing titles than they do now), and c) unlike Sony and Microsoft you have a variety of routes to produce extremely popular first-party software that displays in HD and looks great but doesn't have the cost issues of content-rich realistic-style graphics.
The thing to do in this situation is square the circle: launch early (to get some of the advantage the 360 enjoyed by building up an early library and early adopters) with a $299 system that's in the power-ballpark of the systems that'll follow a year later (like Niro said, a PS2 to their OG Xbox) after giving third parties a year and a half to work on it -- that'll ensure that you're getting all the multiplatform titles, plus maybe some exclusives from devs who are willing to try out your gimmick now that it's attached to a "graphically modern" system, and you'll retain the Nintendo first-party advantage.
Basically, when you get down to it, the motion control part of the Wii plan was a huge success but the underpowered part was a huge failure -- all its gangbuster sales can be credited to the unique software they were able to make using the Wiimote, but all its late-period declines can be attributed to the software they never got because third-parties refused to develop exclusives for the system and couldn't release multiplats for it. Refining motion control, adding minor new gimmick to sell to moms, and making a meaningful graphical jump that ideally sets the pace for the generation would let them consolidate several markets and compete much more effectively on software than they do currently.
Sadly, as always, the network is what'll sink this plan: Nintendo would need to have a PSN-level network structure at minimum and I honestly just can't even imagine that.
No, it really isn't. Increasing budgets have had huge qualitative effects on the way the industry operates. In the days of $2 million budgets, one could easily create a purely exclusive title and recoup off sales from a single platform. In the days of $40 million budgets, that's almost impossible for anything but the largest titles.
