Ever since Nintendo dropped out of the power race, I've always thought they should of gone the cheaper hardware, cheaper price route personally. If it weren't for their gimmicky controllers, they probably wouldn't of had a choice but to either. I mean, sure, they would not get the triple A games still, but it will have Nintendo's first party games with the odd good third party title and indie support. If the price is right, say around 200, I think people would've picked it up still.
I like the idea of a hybrid handheld/console, but either Nintendo are being a bit greedy with the price or they couldn't get the price down low enough to really carve out their own audience. If the latter is true, then maybe they should have dropped the idea for something else instead.
Maybe not a hybrid, but 2 devices (one portable, one console) that share the same games library?