Reggie said "next gen graphics are just the cost of entry", remember? Showing a GC-level game with different controls would mean Nintendo failed the entry exams.
However, if they try to give both messages (Hey, we have the same thing as the next gen version of your current console plus we have a super new controller that will knock your socks off!) the diluted message confuses potential customers. If you try to iterate too many messages at once they become convoluted and it doesn't differentiate you from the crowd. So Nintendo has decided to focus on the positive aspect (the controller that will knock your socks off) and leave the rest to the consumer to find out after researching the system once they've gotten his attention.
This is the most idiotic and delusional argument I have ever heard. Never mind that even the greatest idiots can handle two claims at once, the "we have comparable graphics" message isn't even a message, it's the absense of a "we have better/worse graphics" message, i.e. simply the fact that they reached par. Par is nothing to brag about, what you do beyond par is what you can brag about.
Same here. You can either have your great games, bleeding edge hardware, or your price point. But only 2 of the 3.
The point is that it doesn't take bleeding edge hardware to give adequate graphics. If Nintendo were to release screenshots that make good use of their hardware they should end up on a level similar top that of the XCircle. Unless Nintendo chose to go with below-average hardware, that is (look at the Gamecube, that was hardly bleeding edge).
What do you want Nintendo to do? Release a console that has a revolutionary controller, AND as graphics that are as good as if not better than the competition, AND HD, AND a cheaper price point, AND a smaller and quieter form factor? I don't think so. There has to be an OR in there somewhere, there has to be some trade off.
We've seen that tradeoff already and it's HD. You can't add too many tradeoffs and expect the customer to swallow that. That's what sunk the Gamecube, when customers were undecided and chose to compare features between the three consoles the Gamecube looked like the worst. That must not happen again.