It's hard to compete after the PS2 generation. It got such a flood of support. The n64/PS1 was easily the worst for me. Load times and compromises as people tried to switch to new tools and hardware.
I'll probably still line up to get whatever Nintendo trickles out as a new console, out of obligation. I know it'll be cheap and have at least 1 good game a year, but the days are long gone where it can be a primary console.
I think they had half the right idea when they launched the DS way back, giving Pictochat and a nice UI. The Wii took it a bit further, but they REALLY lacked forethought in the UI department. Upgrades for the Wii/DS are pretty hacky and the system can't really do too much at once to bring people together.
I remember when Nintendo would visit around LA devs when they came down for E3. They'd ask us why we aren't putting more online in their console and we gave the same answers everytime and they don't get it. (Friend codes, ridiculous safety restrictions, etc.)
If anything, this is the first time the Wii is getting criticized outside of nerds. (Who said it from the beginning, but whatever) After Capcom's laughable PR and Nintendo's statements about the new DS, they're finally realizing where they made the wrong turn in terms of 3rd party support.
Although I don't know what to expect in the years to come, if the Wii support is just a fad or not. It's a totally new market, not as dedicated as the core gamers. Will they stick around? E3 is 6 months away.