In the market, Nintendo has the privilege of having a very defined image. This is because Nintendo itself (or what is used to represent it) will oft contrast sharply with the other console makers. Nintendo also has a strong fan base, which is no coincidence. It might not posses the largest share of the market, but it posses a clearly defined one. Now, with more competitors and broader audience, the video-game market no longer can be categorised generically as a whole; it's too far developed, and it's too late to stop now.
Nintendo's section of the market may not be the largest, but it does exist, and it is unusually well defined. Bending their strategy to mimic MS's or Sony's will not work. If Nintendo's next big AAA game was GTA: The Mushroom Kingdom, they'd
a) be laughed at, and
b) lose a whole lot of their current market share
Nintendo's current audience must be catered for first, or the company will have it's bottom pulled from beneath it.
I guess what I'm trying to say is this: rabid audience-expansion at the cost of a strongly held fanbase is idiotic, especially when Nintendo's market is so well defined. Nintendo must expand and win back it's image/3rd party support/legacy or whatever slowly, and that's exactly what they're doing. This generation, Nintendo has: outsourced many of it's franchises, had EAD worked on a new franchise, gobbled up 2nd parties like Pac-man gobbles dots, and collaborated with Capcom, Konami and Square. This is all that can be done with Nintendo's current rigid market.
Winning the casual gamers over is fine, but it must be done with Time and Prudence.